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Discovery’s Zaslav: skinny bundles and D2C to fuel growth

Skinny bundles and direct-to-home distribution will fuel Discovery’s growth as traditional big pay TV bundles continue to decline in attractiveness, according to president and CEO David Zaslav.

David Zaslav

Speaking on an analyst call as Discovery posted its third quarter numbers, Zaslav said that international subscriptions to its content were growing by 2% to 3%, compared with a 2% decline in the US, which he attriburted to “over-stuffed” and over-priced pay TV offerings. He said that there had “really been a rejection of this overpricing” among US consumers.

Zaslav paid tribute to new US-based skinny bundles from AT&T, DISH, Hulu and Sony, and said that other players are entering the space. He said that “in almost every market in the world, these skinny bundles have been a really big accelerator of growth with the younger generation”.

Zaslav said that Discovery was focused on figuring out ways to “help these distributors” market its channels and predicted “an aggressive push” in the skinny bundle space in the near future, despite some sceptisim from analysts about the rate of growth achieved so far.

Zaslav said that Discovery was also continuing “to attack direct-to-consumer opportunities” following the hiring of Peter Faricy from Amazon to help lead its OTT initiatives.

He said the programmer was “leaning heavily into OTT” with “superfan brands and verticals” including Motor Trend, Eurosport and SVOD service Dplay in Scandinavia as well as Golf TV, its new initiative in partnership with the PGA Tour, which will launch in the US next year with a phased international launch to follow. Zaslav also announced the first broadcaster partner for the service – Japan’s J:COM, which will take content from Golf TV on its existing Golf Network linear channel.

Zaslave said he hoped the major golf tournaments would join the platform in due course, but indicated that with an offering centred on the PGA Tour and regional competitions would be compelling.

As an aside, Zaslav all but ruled out Discovery bidding for the regional sports networks to be sold by Disney as a condition of its Fox acquisition, which he said were of uncertain value because they relied on rights that could be lost in the future.

Zaslav was speaking as Discovery posted better than expected revenues from its US operations, with an 8% rise in advertising revenue more than offsetting a 2% decline in distribution and a 29% decrease in other revenues.

Discovery posted overall revenues of US$2.592 billion, up 57% on a reported basis thanks to the integration of Scripps Networks Interactive. Excluding the impact of currency movements and transactions including the Scripps acquisition, the acquisition of a majority stake in OWN: Oprah Winfrey Network and automotive network Motor Trend, revenue was up 1%, boosted by an 3% in International Networks and the 2% rise in US networks.

Discovery’s net income for Q3 was hit by higher restructuring and other charges related to the integration of Scripps Networks. The company posted net income of US$117 million, compared with US$218 million for the prior year quarter. Operating income before depreciation and amortisation was however up 82% to US$1.044 billion.