Discovery Talking With Distributors About DTC

Discovery David Zaslav (left) at a virtual conference with Doug Mitchelson of Credit Suisse (Image credit: Credit Suisse)

Discovery is continuing its talks with distributors as it tries to determine its streaming strategy.

Discovery CEO David Zaslav boasts about the volume of content the company owns, its local programming and the direct-to-consumer offerings it has already launched or acquired, including the Eurosport Player in Europe and Food Network Kitchen in the U.S. 

But while The Walt Disney Co. has launched Disney Plus, NBCUnversal hatched Peacock and AT&T dialed up HBO Max, Discovery as yet hasn’t decided how to best monetize its content and reach non-cable subscribers.

“We’re working with our distributors. We’re in discussions with almost all the large distributors,” Zaslav said Tuesday at the 2020 Credit Suisse Virtual Communications Conference.

He noted that Discovery’s distributors have about 30 million broadband-only subscribers. “There’s a way for us to work with them to reach those broadband-only subscribers and those are the discussions that we’re having and they’re going pretty well.”

Programmers looking to go direct-to-consumer put their current distribution revenue at risk unless they can find a way to make the deal attractive for their current video partners. Discovery has a number of cable execs on its board of directors.

Discovery has also been doing research with consumers.

“We’ve been out in the market. Last Monday, I spent the whole day with focus groups of people that never had cable, cord cutters, under 40, over 40, people that have cable,” Zaslav said.

He said that while the other media companies compete to acquire and produce expensive scripted content, Discovery’s mostly unscripted content and the personalities that star in it have a different but strong appeal.

“We think there’s a lot of product out there, but we think great family content that’s differentiated and easy to navigate will be a real winner in direct-to-consumer around the world,” he said.

Zaslav declined to say when a decision would be made or when a DTC product might launch.

“We're  feeling good about it. We're doing a lot of work and you're going to hear from us on it. We think there's an open space for us,” he said.

Discovery is also feeling better about the ad market. On its last earnings call, Discovery predicted that ad revenue might be down 20% in the second quarter as COVID-19 disrupted businesses.

Ad revenue was down 18% in April, May is tracking “significantly better and June is tracking meaningfully better,” Zaslav said. 

“The scatter market is picking up. Cancellations in the third quarter were significantly better than we thought they were going to be. They’re more meaningful than what we’ve seen in the past, but they’re much better than we thought they were going to be,” he said.

Volume in the scatter market has been going up week by week, and advertisers that pulled money early in the pandemic are now coming back into the market, paying a higher price than they’d agreed to in last year’s upfront, he said.

This year’s upfront will take longer than expected, Zaslav said.

“Right now there’s a fight over price. I think everyone is looking at this environment and saying ‘shouldn’t I get something for cheaper,’ or ‘shouldn’t I get a deal.’ And I think the media side is saying no,” he said. “We think we should get higher pricing. The inventory to promote on television is going in the aggregate down and our share is going up. And so we think we should be more in volume and in price.”

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.