Discovery Challenge

Joe Abruzzese, the new president of ad sales for Discovery Networks, says his challenge is straightforward—boost revenue and pricing at the networks under the Discovery umbrella, which include TLC, Animal Planet, Discovery Health and about a dozen others.

And last week, Abruzzese hired one longtime lieutenant at CBS, Scott McGraw, to help him achieve those goals. McGraw was most recently head of CBS sports sales.

Yet to be finalized is the reporting relationship among Abruzzese, McGraw and Bill McGowan, Discovery's top sales executive before Abruzzese joined the company two weeks ago. Discovery is on record as saying McGowan's duties won't be diminished.

Abruzzese insisted that McGraw's hire did not signal the start of a major raid on CBS sales talent. "He's the only one," said Abruzzese. "Scott was just too good an opportunity to pass up."

Buyers say, if anybody can boost revenues and pricing for Discovery, it's Abruzzese. But the pricing goal will be tough to achieve, they say, because, in cable, supply outstrips demand.

Morgan Stanley analyst Richard Bilotti estimates Discovery Communications revenue will be up 6% to a little more than $1.7 billion this year.

The upside for Abruzzese is that Discovery remains one of the most recognized brands among cable networks. The downside: Its ratings have suffered this year—down in both households and adults 18-49 in each of the first three quarters. On the other hand, TLC, once called The Learning Channel, is up for the year.

More Originals

Some buyers say Discovery has created so many spin-off networks so quickly that the core brand has been diluted.

"It used to be a great brand, more upscale and more educated," said Jon Mandel, chief negotiating officer for ad buyer Mediacom. Now, he said, "you might as well buy Jerry Springer," given the quality of the audience. "They ruined it by dissipating it with so many different networks," he argues.

Billy Campbell, president of Discovery's U.S. networks, says that's a wild exaggeration and that the audience profile of the core brand has not changed that dramatically. "That's an absolute misperception," he says. "I checked with my research people, and there's no evidence to support that."

Campbell says that the company's shareholders (Liberty Media among them) have just approved "significant increases" in both the programming and the marketing budgets for Discovery for the coming year.

As a result, Discovery will have 50% more original programming over the coming year than it had in the previous year, he says. Indeed, Abruzzese says those plans were part of the appeal that led him to make the move.

It was Campbell, a former CBS exec himself who brought Abruzzese to Discovery. He says both Abruzzese and McGraw had questions about Discovery's commitment to program development. But when laying out the company's plans, he said, "it took about five minutes for their eyes to get big and say they wanted to be on board with what we're going to do."

Buyers respect Abruzzese and say that Discovery couldn't hire a better sales executive to take it to the next level of ad volume and pricing: He's professional, personable and smart, says Bob Riordan, senior vice president, director of national broadcast for media buyer MPG in New York. Even Mandel, who knocks Discovery, has only good things to say about Abruzzese.

Not a must-buy

At the same time Riordan has little interest in helping Abruzzese achieve his goals.

"Outside of ESPN, there is no must-buy cable network," he said. "You can buy around any other cable network, and that is the real difficulty he is facing. Can you buy around CBS in prime time right now? Not really. Can you go to a client with a presentation that does not include Thursday night? No. But if I tell my client I didn't buy Discovery because they wanted to raise the price by 30%," the client is going to say, "Good work."

Closing the cable-broadcast pricing gap, said Riordan, will be a "long process, not a short-haul process."

Andy Donchin, director, national broadcast for Carat, New York, said Discovery needs to "reassert its dominance" among upscale, educated viewers. "There's a lot of buyers out there just buying on price." In today's market, he said, "as a network you have to justify why you deserve a premium over other networks."

But Abruzzese argues that the premium that the broadcasters get is too high. "If the audiences are similar''—and they are, he argues—why should an advertiser pay a $15 cost per thousand for a network instead of $9 on cable?"

He also said that erosion continues to eat away not just at broadcast network ratings but also at their arguments that they reach a huge unduplicated audience in one shot. "The perception was that one 10 rating was better than 10 1s [on cable]. But now the 10s are 6s, and the 1s are 2s. So they're getting closer and the unduplicated-audience pitch doesn't play."

Buyers are going to hear of lot of that from Abruzzese in the coming months. He'll be talking up shows like Trading Places
instead of CSI, niche networks (like Discovery Health) and cross-platform opportunities (buy 'em all and it's like buying a broadcast network). It's a far cry from the "cable fable" pitch he used to present to CBS clients. At upfronts, it wasn't beneath him to suggest that cable's main draw was pro wrestlers and animated cartoons.

So does he have a credibility gap now that he's on the cable side? Buyers say no. "That's selling," said Steve Grubbs, CEO of New York- based PHD North America. "He's leaving one great brand to join another." As for Abruzzese himself, Grubbs said Discovery couldn't have gotten a better get. "He knows everybody on the agency and client side. His reputation is first-class."