Wall Street is going to have to wait a little longer for Discovery to provide details of its plans for a direct-to-consumer product offering the companies biggest brands and most compelling personalities.
Discovery’s stock price fell 4% on Wednesday despite a strong second-quarter earnings announcement Wednesday morning. The reason why seems to be what feels like a long delay in Discovery getting into the streaming game big time.
On the company’s earnings call, CEO David Zaslav said that if Disney Plus and other recent DTC plays by media companies were sports cars, Discovery would be rolling out an SUV.
“We’ll be coming to you very soon with more detail and exactly how we're going to roll it out. But our SUV is filled with large fresh content, a huge amount of original content,” said Zaslav.
Zaslav said that while quarantining, consumers have been watching Netflix, Disney Plus and the other, picking at their programming offerings, trying to figure out what’s good, different and new.
“And so we think we will launch with a differentiated service, this new SUV, which people will [find] useful every day, all the time. It'll be dependable all the time and your friends and all the characters that you love, which really differentiates us fit in this new product, this SUV,” he said.
In a research note, headlined “Discovery: Can the SUV Float,” analyst Michael Nathanson of MoffettNathanson noted that the market didn’t seem to care about Discovery’s affiliate renewals or event its stock buyback program. Seems all media investors want to know about is how companies are pivoting to streaming.
“Finally, management more than hinted that Discovery will be launching a new SUV, eh … DTC service that aggregates all of Discovery’s content in an all-in-one app targets for cord cutting,” Nathanson said.
Discovery has been teasing a DTC product for more than a year, but the announcement has been slowed, partly because Discovery has some big cable players on its board (in June the company said it was talking with distributors about DTC) and because the former Amazon executive charged with building Discovery’s dream car, Peter Faricy, left, also in June.
With analysts nearly panting, Zaslav gave a glimpse of what Discovery’s working on.
“You should expect that we'll be offering our content in ways that are competitive in terms of whether they have commercials or don't have commercials, or how much commercials they have, we've thought that out carefully and we intend that our product will be very competitive and flexible. And we expect to have multiple partners and that's how we're going to be successful domestically and around the world,” he said.
But if Discovery has a DTC plan, now’s the time to share it.
“Discovery needs to build a big enough business quickly enough that can serve as a Life Boat (SUV?) to offset the long-term worries about the melting ice cube that is global Pay TV,” Nathanson said. “In fact, with each passing day, there are more and more examples of programmers deciding to launch DTC products that could potentially cannibalize the bundle and accelerate the downward trajectory of cord-cutters.”
Time did not seem to be of the essence to Zaslav, who said the game is only in the fourth inning.
On the earnings call, he said he thought that Netflix, Disney and the others have paved a lane to get people to buy and stream content.
“And we think we got a great lane, it's almost like that lane is ours. If you have Netflix, if you have Disney Plus, if you have Amazon, if you have any video product who wouldn't want what we have, it's what most women in America watching all the time,” he said.
“We think we have the right recipe and we'll take you through it very soon. And we think you're going to love it. We hope you like it. And we hope more importantly that when we get out to consumers in the U.S. and around the world, that they like our hand as much as we do, Zaslav said.
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