Discovery Wants to Leverage the Olympics to Create a "Netflix of Sports" for Europe
The U.S. company behind 'Shark Week' and 'Deadliest Catch' is using Pyeongchang to launch what it hopes will become a pan-European player.
When the Olympic torch is lit in Pyeongchang, David Zaslav will be paying close attention. The CEO of Discovery Communications has put down a $1.6 billion bet that the Games can transform his business in Europe, turning a cable company best known for the likes of Shark Week and Deadliest Catch into a "Netflix for Sports" on the continent.
Discovery picked up exclusive rights across Europe, excluding Russia, for the next four Olympics for 1.3 billion euros ($1.6 billion) in 2015, making it the second-biggest Olympics broadcaster after NBC. But while NBC is targeting only American audiences, Discovery's Olympics audience will be spread across 50 countries on its pan-continental Eurosport channel, an ESPN-style network Discovery acquired from French network TF1 for $1.7 billion in two stages across 2014-15.
Discovery is going all in with its coverage in Pyeongchang, promising more than 4,000 hours, including some 900 hours of live action. Pyeongchang 2018 is "the biggest undertaking of a single event" in Discovery's history, according to Jean-Briac Perrette, president of Discovery Networks International.
But the real innovation, and the true testing ground of Discovery's new sports strategy, will be the Eurosport Player, an interactive platform that will offer, according to the channel's hype, "every minute, every athlete and every sport" of the 2018 Olympics, "live and on-demand" for viewers on PCs, tablets and mobile devices. The Eurosport Player does away with traditional Olympics programming by letting viewers pick the sports they want to watch, from figure skating warm-ups to the curling semi-finals. Crucially, given that Eurosport is targeting viewers across dozens of competing countries, the player will allow national audiences to customize which teams or local heroes they choose to follow. It's what Zaslav means with his "Netflix of sport" analogy.
A lot is riding on Discovery's Olympics streaming experiment. Last November kicked off with news of a slight dip in Discovery Communications' third-quarter earnings, which fell from $219 million to $218 million, and Zaslav has made it clear the company is shifting its business model toward a more direct-to-consumer approach. Zaslav outlined in an industry talk in early January that Eurosport aims to create online subscription services catering to superfans of particular sports.
To see if they're reaching those ski-jump and luge fanatics, Discovery will be aggregating viewing figures in a completely new way, tracking viewership across all platforms, both live and catch-up. "We'll be rolling out this new metric, which we think is more applicable to the 2018 reality of how people are consuming content," said Perrette in late 2017. While the new metric isn't yet a currency in the ad sales market, Discovery is hoping it will be recognized as a more accurate way of capturing true viewing figures compared to overnight ratings, which Perrette termed a "prehistoric way of looking at video consumption."
What Discovery learns from its Olympics trial run — and the company will be sharing all of its viewership data with the International Olympic Committee — will inform future Games coverage.
Still, Pyeongchang is looking like a loss leader for Discovery. Jefferies analyst John Janedis estimated, in a report late in 2017, that the Olympics would result "in a $40 million drag on 2018 operating income before depreciation and amortization."
But Discovery CFO Gunnar Wiedenfels points to lucrative sublicensing deals the company has signed with the likes of the BBC and German public broadcasters, as well as with Amazon in select European territories, to provide them with live footage of the 2018 Games. Overall, "we do not expect the Olympics to have a material impact on our full-year profit," Wiedenfels said about the 2018 Games.
"Content licensing will help recoup much (or possibly most?) of the 1.3 billion euro commitment the company made," wrote Pivotal Research Group analyst Brian Wieser in a Jan. 9 report on Discovery's Olympics deal, estimating that Discovery stands to make $123 million to $184 million in licensing fees for the 2018 and 2020 Games in Germany alone.
Discovery is looking to build on the next two Olympics in Asia — the 2020 Summer Games in Tokyo and the 2022 Winter Olympics in Beijing — before a presumed payoff in 2024, when the Summer Olympics will be held in Eurosport's home city of Paris. Discovery helped the French capital secure the Games over its main rival, Los Angeles, backing the city in the first round of bidding in 2017.
Eurosport now stands to reap the benefits of having an Olympics in a European time zone. But first, it has to make things work in Pyeongchang.
This story first appeared in the Jan. 31 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.