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Discovery Communications CEO David Zaslav at an investor conference on Wednesday discussed his take on the Charter Communications deal for Time Warner Cable; the outlook for nonscripted content, which the company focuses on; and various other industry topics.
Speaking at the Sanford C. Bernstein Strategic Decisions Conference in New York in a session that was webcast, Zaslav said the Charter-TW Cable deal posed the challenge of creating a new bigger player, while the upside was having a big player supporting the broader rollout of TV Everywhere. Zaslav once again argued that a broad availability of TV Everywhere services would be a boon for content companies.
“Consolidation is always a challenge. And when the distributors get bigger, it presents some issues,” Zaslav said. “But in the case of Charter, I think the challenge of it is another big player and the challenges that presents. The positive of it is that you have another major player driving with real force toward TV Everywhere. So, you have Comcast and X1, which is a terrific product, driving toward TV Everywhere. And now you will have Charter with [Charter CEO Tom] Rutledge and [Liberty Media chairman] John Malone and [Liberty CEO] Greg Maffei saying ‘Why aren’t we doing that’?”
Malone owns a big stake in Discovery and, via Liberty Broadband, Charter. Zaslav had spoken out against the planned Comcast acquisition of Time Warner Cable, which was recently abandoned amid regulators’ concerns, opening the door for the Charter deal, which is valued at $78.7 billion.
He also once again said TV Everywhere has been slow to be rolled out in the U.S., saying it was due to the market not having been “rationalized.” He said “dysfunction” has stopped that from happening.
Asked if Discovery’s unscripted nonfiction content focus would lose some of its appeal in an on-demand world, Zaslav said: “We fought very hard to grow our market share here in the U.S. … We have to worry and evolve and think about, as the world changes, how is our IP.” He said though that nonfiction to us “is still a huge driver and we believe will be a huge driver going forward,” because the company owns its content and sees all its brands as targeting superfans.
“We are the leader in science,” he said, suggesting the company could decide to launch a science app worldwide and charge people for it. “We are looking at it,” he said. “Generic” content gets lost though, Zaslav said. So Discovery is focusing on “superfan baskets that work around the world.”
Questioned about various other hot-button topics, Zaslav also said Wednesday that one of the challenges for U.S. media companies was “an antiquated Nielsen” ratings system. Emphasizing that content consumption was changing, he said updated ways of measurement were “critical.” But he added: “There’s no point whining about it. … There is stuff falling off the table that we don’t get credit for.”
He mentioned a ringtone-based ratings system in Denmark, saying viewership in the country was down, then was up over 10 percent after the system’s launch.
Zaslav said going directly to consumers with content offerings in the OTT world was easier in Europe, where such offers seem to help TV ratings, compared to the U.S., where it may hurt them and pay TV operators are key gatekeepers.
Should the industry stop selling content to Netflix and Amazon? Zaslav said scripted content seemed the solution for networks a couple of years ago given ratings successes and sales to digital players. “Everybody ran there,” he said. “More and more they are saying why should I buy a scripted series that ran on a cable network.” With digital players doing their own originals means other players must be more disciplined with their scripted content strategies, he said.
Advertising trends were also part of the discussion. The ad market around the world remained “pretty tepid,” Zaslav said, calling it a malaise amid weak economic growth. “It’s pretty flat around the world.” The U.S. ad market has become “meaningfully better” than the fourth quarter, but volume and monetization are lower than the company would like. And the upfront should be “pretty good,” with similar trends as in 2014, including quite some inventory left for the scatter ad market.
Zaslav got no questions on the decision by the company’s TLC network to yank highly rated working class docu-comedy 19 Kids and Counting after castmember Josh Duggar, 27, admitted to molesting underage girls, including some of his sisters. It was the second scandal to affect TLC over the past seven months. In October, it emerged that Here Comes Honey Boo Boo star June Shannon was dating a convicted child molester, which prompted that series to be cancelled.
Outside the U.S., Discovery continues to see double-digit market share growth, the CEO emphasized.
Overall, he said Latin America is “kind of the rocket ship” of growth. But he reiterated that management continues to see Europe as “the new emerging market,” even though “we are getting hurt right now by FX,” foreign exchange fluctuations amid a strengthening dollar. He said Discovery benefits from Eurosport and from seeing other companies investing less or pulling out of European markets, unlike Discovery.
Asked about skinny bundles, Zaslav said Brazil tried a 25-channel bundle a while back, and Discovery went along with it. “Our subscribers were growing, but the economics weren’t exactly in line,” he said. “It turned out to be a great decision for us in Brazil.” The company had five of 25 channels in the bundle, and brand perception and advertising revenue benefited, he said.
He also said the company’s sports business, built around pan-European sports channel Eurosport, was profitable and growing nicely. Does Eurosport need soccer? Zaslav once again said no. While the company may take some soccer rights in some markets, he said “we don’t need the big-ticket sports,” which especially means soccer.
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