Discovery, AT&T Sign Carriage Pact

Discovery Communications said it has signed a comprehensive carriage deal with AT&T for its U-Verse and DirecTV platforms, as well as its upcoming over-the-top service, DirecTV Now.

The deal includes Discovery’s linear networks, a robust on-demand offering and TV Everywhere distribution. Discovery’s content will be available to DirecTV and U-Verse customers via set-top boxes, streaming and temporary download through their TV Everywhere services and via Discovery’s websites and apps. Availability on DirecTV Now will commence when the service launches in the fourth quarter.

“We are extremely pleased to announce a comprehensive long-term agreement with AT&T, that provides customers with continued access to Discovery’s portfolio of loved brands across AT&T’s linear and digital platforms,” said Discovery domestic distribution  president Eric Phillips in a statement. “We are pleased that we were able to get a win-win deal done with the largest distributor in the country. Our agreement greatly expands the AT&T platforms that will distribute our award-winning content, including future distribution on DirecTV Now for our portfolio of brands.”

DirecTV Now is expected to be a game-changer for AT&T, luring customers who have so far resisted pay TV with a streaming video option chock-full of on-demand and live content. AT&T announced DirecTV Now in March and so far has signed content deals with HBO and Cinemax.

“Discovery Networks’ exceptional content adds tremendous value for AT&T’s DirecTV, DirecTV Now and U-verse customers who will now be able to enjoy it on virtually any screen,” said AT&T chief content officer Dan York in a statement. “By adding the Discovery networks to the growing DirecTV Now lineup, we are continuing to build a streaming service for the connected generation that we believe will be second-to-none in the industry.”

While terms of the deal were not disclosed, the pact is believed to be favorable for both parties, and reflects the direction Discovery has taken in past carriage deals.

In a blog post Thursday, MoffettNathanson wrote the deal also removes one of the bigger overhangs on Discovery stock -- that it could take a hit from continued distributor consolidation and could be impacted by rate resets and tiering issues that have affected other content providers like Viacom and Scripps Networks. With the AT&T deal, that doesn't appear to be a concern after all, with MoffetNathanson adding in the post that Discovery shouldn't see the same meaningful decline in affiliate fee growth as its peers. 

"One of the reasons why Discovery’s not in the same camp as some of its peers is that Discovery’s prior deal with DirecTV occurred in 2012 over this time, Discovery’s ratings have meaningfully increased," MoffettNathanson wrote. "With both Comcast and AT&T DirecTV now under contract, Discovery has completed deals with the two biggest MVPDs which should set the pricing framework for the rest of its renewal cycle."