Cable Operators Should Be in The Channel Store Business, David Zaslav Says

The top free feature in Roku's Channel Store
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As programmers set up direct-to-consumer services, cable operators can profit by becoming channel stores, offering the streaming services to both their broadband subscribers and their pay-TV customers.

That was the message from David Zaslav, CEO of Discovery Communications and Josh Sapan, CEO of AMC. Both Discovery and AMC have dived into the streaming business. But they said the pivot to a direct-to-consumer business hasn’t hurt their relationship with distributors.

At last week’s MoffettNathanson media investors conference both execs were questioned about how cable operators were reacting to the programmers going direct to consumer. Only a few years ago, such a move would have drawn strong reaction from operators who’ve long held that the fees they pay entitle them to exclusive access to content.

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Zaslav pointed to recent distribution deal renewals, saying that cable operators still see Discovery as an important part of the cable video bundle and one that brings operators and consumers great value.

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The operators are also starting to see a good business in working with programmers to sell streaming services to their broadband customers, instead of letting Amazon or Roku do it.

“I think the cable guys in the U.S. now are waking up, going ‘wait a minute, this channel store stuff is a good business,’” Zaslav said. “Brian [Roberts, CEO of Comcast] is very clever. He has all those broadband subscribers and he could be the one that sells them Discovery Plus and a lot of other products, and he makes money on each one of those incremental to broadband. That could be a very big business for all of those great entrepreneurs."

Zaslav noted that in Europe, Comcast’s Sky is already the key channel store. “In the U.K. they have a very compelling market share. If you want to be direct to consumer in the U.K., you’ve got to make Sky your best friend. It’s not Roku. It’s Sky,” he said.

“I think more and more you’re going to see this great alignment,” Zaslav said. ”I think they're ready to play. I think the leader in that is Comcast in a way that I think is going to be very effective for them."

Similarly, AMC Networks’ Sapan said that instead of its direct-to-consumer angering cable operators, there are “new levels of harmony” in the relationship.

Sapan said cable operators see AMC’s cable networks as having real value at an appropriate price--a price they can make money off. And the streaming channels mean the operators can put AMC on “two shelves” where broadband and pay-TV subscribers can opt to buy them. 

The first step on the road to becoming a cable store for operators is to offer consumers a better interface. 

I think that when you look at the best of the interfaces that greet the consumer on Xfinity and now Spectrum and Cox, you see vast improvements, and those vast improvements are an invitation to sell different things,” Sapan said. 

He said operators have become much more fluent and capable at selling broadband and selling wireless. They’re also better at “figuring out how to package and price, and I think it leads right to premium streaming, what we’re doing,” he said. “And so they are embracing what we’re doing and I think they’re gong to become increasingly better at selling all this material in what you call a video store.”

Jon Lafayette

Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.