Discovery Int'l Boss on the Benefits, and Challenges, of Airing the Olympics Across Europe
"We are all about live," says JB Perrette, president and CEO of Discovery Networks International, about the first Games to be shown on the company's Eurosport. "It's a massive production and undertaking."
When the International Olympic Committee in the summer of 2015 awarded all TV and multiplatform rights in Europe for the four Olympic Games over the 2018-2024 period to Discovery Communications and its pan-European sports network Eurosport, it was a major coup for the company.
The European rights to the Olympics have typically been split on a country-by-country basis, making the deal worth $1.45 billion a game changer that marked the first time the Olympic Committee has sold all the European rights to a single media company.
Discovery has said it will benefit from airing the Olympics in Europe in terms of ratings, advertising revenue and a strengthening position in carriage negotiations.
Just days ahead of the Friday opening of the Winter Games in PyeongChang, South Korea, JB Perrette, president and CEO, Discovery Networks International, talked to The Hollywood Reporter about the importance of airing the Olympics, his company's coverage plans, financial expectations and new approaches to measuring viewership.
How important is having the Olympics on Eurosport and digital platforms for Discovery's European strategy and how will you benefit?
We have been on this journey now for three years. It is a monumental moment for us. It is the biggest programming event this company has ever undertaken. We couldn't be more excited. We were thrilled about the idea, obviously, three years ago, more than three years ago when the original seed of the concept started. Then we got the rights, and then we have been on this mission for two and a half years to get the enormous, almost military-style, effort in terms of resources, teams, technologies to try and deliver on this promise of doing a couple of things for us.
That is, take the biggest global event and for the first time ever take it across almost 50 markets across Europe, make everything available on digital and on our [Eurosport] Player, which is another first, and then bring the same thing we have been doing for Eurosport for the last four years since we acquired it, which is investing more and more in the storytelling, the talent and the technology to make the Games more relevant for people than ever before.
All those things come together to deliver our three imperatives we have been marching towards, which are reaching more people on more screens than ever before, and also reaching more young people as part of that, making it the first fully digital Olympics across Europe, having every moment of all the Games and offering what we call the Discovery Difference. That is better storytelling, more relevance, using technology, such as our Cube technology, and sports explainers to make the stories and sports more relevant to viewers.
How will the focus and tone of your coverage differ from Olympics coverage in the U.S. and past European coverage?
Number one is the talent and the know-how and expertise that talent brings coupled with the technology. There are a lot of great broadcasters in Europe who are partners and will do great coverage and have done so historically. A lot of those broadcasts will have great national stories. We will not just bring you the great national stories, but you will also be seeing it through the eyes of a network across Europe of the world leaders in those sports, not just the national leaders (U.S. ski star Bode Miller; Norway's Kjetil Andre Aamodt, the only man to win more Olympic alpine skiing medals than Miller; German ski jump Olympic champions Sven Hannawald and Martin Schmitt and more). We have as a commentator one of the most medaled Olympians in cross-country, and the same in ski jump. If you're a fan of those sports, it's great that you can get your local-market commentary, but the only place where you get the world leaders' commentary and input is Eurosport. So that's one differentiator.
The second is we have invested a lot and spent a lot of time to use technology to make the sports clearer, more understandable. Obviously, in some cases, these are sports that audiences come in and out of every four years. Part of what interested us in the Olympics was being a broadcaster of these sports much more 365 days a year, but we want to get more people engaged, such as via the sports explainers that in a very simple, clear way let people understand how does ski jumping work, how does the scoring work. As a fan of curling or short track, you may not understand exactly how it works. (Discovery has always answered people's questions.)
Talk about about what the Cube is and your technological plans for the Olympics.
We and [Discovery CEO] David [Zaslav] have often said that Discovery does better closer to real. We have announced that we will be doing 50 hours in VR from the Olympics.
The Eurosport Cube is essential this cutting-edge technology to bring a very AR driven interactive technology for our analysts who can pull out, say, an alpine skier off the screen in the middle of the Cube and turn them around and say you see their knees here, their extension was too high and they came off the mogul or jump too spread out as opposed to in a nice tuck.
Using technology to get the viewer as close to real as possible is part of what we see as that Discovery Difference.
How do you think about linear TV versus digital and live versus tape delayed coverage? How much does live viewing matter nowadays?
Live will still be the primary, we think. Sports by its nature is very focused on live. We are all about live. Everything will be available live on the Player, so we are excited about that. The flip side is also that, particularly given time zones, that there will be an element of highlights, clips, other social engagement that will happen on a time-delayed basis. We're leaning into both heavily. That's part of the reason why we are coming out with a new way to measure audiences.
It's new in two ways. Number one, it's new in the sense that no one has ever measured the Olympics' impact across Europe holistically. We are in a unique position to do it. Number two is no one's done it in a combination that aggregates pay TV, free-to-air, digital, social in one place. The third is just redefining the metrics.
We are going to be talking about three metrics that we think are much more representative and will be around video and redefining essentially what we're calling the New TV, which is not television, but total video. That is the number of videos viewed and the volume in terms of hours across all platforms, actual users, again across all platforms, and an engagement metric. There is so much talk now, and obviously from an advertiser perspective, about associating yourself more with things that are no longer passive consumption, but active. We're big believers that this is the kind of event and the stories around the Olympics are the stories that people are most engaged with, because they are human.
They are about people who have sacrificed a lot to get to this one-minute, two-minute, five-minute moment, and then everything is on the line. So we are going to measure engagement across platforms. These are remarkable sports stories, but also remarkable human stories.
Will you look to monetize that insight this time around or in future Olympics?
I think it's got two purposes. Number one, given that it's the biggest event in the world and it will be, we think, by its nature the most multiplatform, it is a laboratory to track consumer adoption and behavior in a multiplatform world. So it will provide massive amounts of insights for us that we can then apply to other parts of our business also. The second is more the currency piece of it that you are referring it. For the purposes of 2018, it's a collection year, it's largely about pulling the data together, understanding it, analyzing it and then as we go forward looking at commercializing those insights and metrics in a better way.
This is the first part of the journey. The short answer is we're commercializing the audience in ways today, but with these new metrics, we're at the beginning of the journey.
Do you expect more digital than linear TV viewership in some of your European markets?
The short answer is I don't know. And to a certain degree I don't care. The geography of viewership is clearly going to be constantly in flux. What we care about is making it available in all the places that people want to see it and then re-aggregating the metrics to properly see how many people engaged and viewed and then best package those metrics up to work with our advertising and other sponsorship partners to figure out how it is benefiting their consumer.
Inevitably, over time there will be changes in which screens people watch it on. Some of that will be consumer behavior-driven and some of it will be other things. The fact that some of the best events are going to be happening in the morning in Europe time zone-wise when a lot of people are at work, probably means that you are going to see more online viewership.
What are some of those "best" events in the Winter Olympics?
Some of it is very market-dependent. Alpine skiing is big, hockey is big, biathlon. In Poland, ski jumping is probably one of the biggest sports, speed skating in the Netherlands.
The wonderful thing about the Olympics is there will be some breakouts that you can't even predict today, say, some story about a crazy crash in the bobsled, but then the person recovers and they come back.
Do you see the Olympics as a driver for long-term subscriptions to the Eurosport Player? And what's the biggest focus for Discovery in terms of business impact — ratings, advertising, financials, brand building with the Olympics or something else?
It's kind of all of the things you said. But it goes back to the three things, the key objectives we have ultimately been religiously focused on. One is more audience and more engagement across screens, and younger, so there is an audience and reach element to it. Second is the digital component and driving usage of our Eurosport.com and our Eurosport Player service.
It will be an evolution. This will be our first one for this. We are going to keep getting better as the Olympics roll on. We are clear that, as always when you are trying to innovate, things won't always be perfect, but we will keep building that. We want to drive users to our digital properties and raise awareness and registrations for our Eurosport Player business. (The company has not disclosed the number of subscribers to the Player. It has in the past said that subscribers on average pay $8 per month for the Player. But it has special prices these days, with most markets, including Germany, offering a five-day free trial and the U.K., along with others, offering a 99 pence price for the first month, which then converts to 6.99 pounds monthly or an annual pass.)
And the third is the brand benefits. We do all those things and bring the stories to life. We have always thought the Olympics and Discovery were kind of a brother and sister of the same family. We want to benefit from the brand halo that comes from the Olympics and vice versa.
How much is Discovery investing in production and marketing for the Winter Olympics in South Korea? Do you expect to break even on these Games, make a profit or a loss? Discovery CFO Gunnar Wiedenfels has said the company will expense $100 million in production and other costs in the first quarter and "we do not expect the Olympics to have a material impact on our full-year profit" in 2018.
We don't like to talk about specifics of how much the marketing or production is. But I can tell you we will have over 1,000 people on site, we've got 17 different studios in action. We will have the first-ever what we call Radical Van, which will be the first time ever at the Olympics we will have a mobile studio (that will allow Eurosport to get close to the fans or bring in an athlete). So it's a massive production and undertaking, and we're doing it for almost 50 markets (in 42 languages). It's unprecedented, the scale technically, operationally, production-wise. It's a whole different level.
In terms of the financials, it's consistent with what we said in the beginning. Over the period of the eight years, as we said, the Games will be profitable. We feel good about that.
How does Discovery feel about the time zones given that this one and the next two Olympics are in Asia (Tokyo and Beijing), which you could argue is trickier time-wise?
When you sign up for the Games, you know there is going to be variability. And part of the benefit of the Games is they do move around. It brings you different perspectives from different places around the world. At the end of the day, does the fact that some of the events will happen from 2:00 until 6:00 in the morning (European time) impact on some level live engagement? Yeah. We are all cognizant of the fact that closer time zones are better from a traditional viewership standpoint.
But that is, again, where the metrics need to be reviewed. The flip side is the benefit of people waking up and saying, "Oh, I just saw this notification that there was a crazy ending to the downhill," so people will consume it in a different way. And frankly, for these big events people will find it. The fans are still very active.
It's exciting. In the old days, it was more challenging, because if you didn't have a TV set in the off-hours, you were just out of luck. Now, you can watch it from your bed on your device, you can watch it from your office, you can snack on it later, you can catch up on it. We have a lot experience with things like the Australian Open or even the U.S. Open in primetime in the U.S., which is obviously the middle of the night here. In some ways, the trend we have seen year after year, those events' digital consumption and on the Player usually end up making these events some of our best registration and customer acquisition events, because people are not in their homes all the time.
Discovery has said the majority of Olympics revenue will come from sublicensing rights to other networks and platforms in some markets, with additional revenue coming from advertising and digital, plus, some benefit to carriage revenue...
At the end of the day, almost two-thirds of the value of the economics of the Olympics comes from our sublicensing. The great news is we have over 40 partnership deals. We evaluate that on a market-by-market basis. Obviously, in the markets where we have all the assets we can bring to the table in terms of broadcast, pay TV, digital, such as in Norway and Sweden, we do it all our ourselves.
In other markets, we are constantly evaluating what makes the most sense from the business and audience perspective. We have a couple of examples from the past where events show up on a free-to-air broadcaster in our market and they are on our air on pay, but because we are covering it differently, we have different angles, we are focused on the really passionate fans and have different analytics and technology, both audiences rise.
Sublicensing is a great way to get more awareness to the Games. Our goal is to try to get the total boat to rise.
What have you found so far to be the biggest challenge and the biggest positive surprise of moving into the Olympics?
On the television side, our Eurosport just continues to improve year after year, and it is a world-class team of sports production that covers these sports day in and day out. So the thing we probably found to be as good if not better is we bought the Olympics in part, because we are the home of Olympic sports in many ways. So in all the test events that we have had, covering the World Cup in the downhill or a ski jumping event, and the expertise of our producers and production teams have shown up in a major. We have also been able to get the best talent, I think, and the best analytics. That's been great and even better than maybe we expected at the time.
On the things that are most challenging, it is doing a great digital proposition, live-streaming thousands of hours of content, plus the social, plus the shortform, plus creating originals, working with so many different partners, doing new channels and new content for Snap. the digital piece is obviously massively important and it is only going to grow, but it also in a constant state of innovation. And with innovation come challenges, technology and product challenges, and so that, for the right reasons, will constantly be the one that is the most challenging in many ways, and we know we're not going to be perfect.
We're going to do some things wrong, we are going to learn some things, there are going to be some hiccups here and there. But that is what pushing the envelope means, and so we are comfortable with the fact that we are not going to get it 100 percent right. But we are focusing as much as we can on striving for that.