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Discovery, led by CEO David Zaslav, said on Monday that it has reached more than 11 million paying subscribers worldwide to its direct-to-consumer services, including Discovery+, and would hit 12 million at the end of February.
In its first earnings report since the Discovery+ launch about seven weeks ago, the company also reported that U.S. advertising revenue in the fourth quarter of 2020 improved to come in roughly unchanged compared with the year-ago period., in line with Wall Street expectations. “Advertising was flat as higher pricing and the continued monetization of content offerings on our next generation platforms were offset by secular declines in the pay-TV ecosystem and lower ratings,” the firm said.
The company’s figures for total paying subscribers to its direct-to-consumer services surpassed a Wall Street consensus forecast for 10.5 million as of the end of March. During an at investor day in December, the company had reported 5.2 million subscribers, mostly in international markets where it decided to rebrand existing offerings to Discovery+. Discovery didn’t break out U.S. and international subscribers in its earnings report.
Discovery+ launched in the U.S. on digital gateways like Roku and Amazon Fire TV, and Zaslav on a morning analyst call hinted at coming U.S. cable TV operator distribution partnerships to further accelerate domestic subscriber growth. That will call for Discovery+ to be “embedded” technically with domestic cable players just as the new streaming platform is integrating with mobile phone giant Vodafone in Europe via a longterm content and distribution partnership.
Here Discovery is betting on the Olympics and live sports to kick off the international rollout of Discovery+ in the second half of 2021 and into 2022. Discovery International president and CEO JB Perrette told the analyst call that the launch of Discovery+ will see the existing direct-to-consumer offering Dplay phased out ahead of the Tokyo Olympics and collapsed into the new streamer.
That will be followed by the international rollout of Discovery+ gathering pace in the second half of 2021, with Discovery’s deal with mobile phone giant Vodafone in Europe becoming a springboard. Discovery and Vodafone have a long-term content agreement covering 12 markets that will bring discovery+ to mobile phone customers in the U.K., Germany and other countries across Europe.
The goal is streaming and unscripted content increasingly becoming the future for Discovery globally. Zaslav argued subscribers of Discovery+ spend twice the time viewing programming, compared to Discovery channels on linear TV services. And that will feed through to growing per-user revenues.
“As we scale, and usage continues, we are confident our ARPU will grow meaningfully,” Zaslav said of Discovery’s ARPU, or average revenue per-user ratio. But Discovery execs were quick to tout their linear TV services as revenue generators not likely to be left behind in the pivot to the streaming space.
Zaslav stressed Discovery will continue to invest in its traditional channels worldwide, which in part are feeding subscribers to Discovery+. “It’s still a great model,” he told analysts. Beyond Discovery+, the company also offers direct-to-consumer services like Food Network Kitchen and MotorTrend OnDemand.
Zaslav argued Discovery+ was differentiated from broad-based scripted entertainment-centric streamers as Netflix and Disney+, and that the new streaming platform’s bread and butter would be non-fiction TV. “We’re not being guided as much by they’re watching this show or that show,” he told analysts, as Discovery represents half of TV viewership beyond scripted franchise series on major streaming platforms.
“People are willing to pay for the other 50 percent, so far. And that could be a yellow brick road for us,” he added.
MKM Partners analyst Eric Handler wrote in a Thursday report previewing Discovery’s fourth-quarter results report: “We view Discovery+ as a quality product with global appeal and a large addressable market. However, with Discovery shares up 97 percent quarter-t0-date versus a 10 percent rise in the S&P 500 (due to a combination of a short squeeze and a positive view towards the Discovery+ launch), we believe there is a lot of good news being priced into the stock.”
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