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Discovery to ‘supercharge’ Dplay, mulls aggregated OTT offering as streaming offensive gets underway

Discovery CEO David Zaslav has said his company is looking seriously at the possibility of aggregating its content assets into a single OTT streaming service, as Discovery increased its revenue and profits in the fourth quarter despite a decline in its subscriber numbers.

David Zaslav

The company increased its advertising revenues in the US despite market challenges and grew its domestic distribution revenue by 5% thanks to price increases and broader distribution with vMVPD operators.

Speaking to analysts after the results were posted, Zaslav said Discovery’s management was continuing to “evaluate the possibility of offering an aggregated platform of all of our channels, brands and personalities, quite possibly with the help of any number of distribution partners in the US and around the world” as an alternative to developing “superfan silos” based around specific interest areas, but had yet to take a decision.

Zaslav said that he was confident that Discovery was “playing a different game” to other streaming providers thanks to “the efficiency of our content”.

“We believe there are a number of direct-to-consumer business models that are scalable, sustainable economically and rational from a cost perspective as we expand and complement the linear ecosystem. And evaluating this opportunity set is a strategic imperative for our leadership team,” he said.

Zaslav said that, internationally, Discovery was succeeding in direct-to-consumer with “Hulu-like products” such as Dplay, Joyn in Germany and its forthcoming JV with Polsat in Poland, which will combine Discovery-owned TVN’s OTT platform with that of Polsat.

“We are actively exploring additional opportunities to expand our model to other major markets in partnership with local programming leaders, perhaps in other JV-type models, where we believe we offer a winning solution for incumbent broadcasters to align and create compelling packages for consumers,” he said.

Zaslav said that this year will see an acceleration in Discovery’s OTT strategy internationally,  and highlighted the potential of the Dplay brand in a markets including the Nordics. He said that Discovery would “play a bit more offensive” with OTT in markets where distributors are consolidating.

CFO Gunnar Wiedenfels said that Discovery would “supercharge our expansion of Dplay in Europe” this year and push ahead with other OTT initiatives including its planned Magnolia service with US home improvement celebrities Chip and Joanna Gaines, food-themed FNK and its planned service around BBC natural history content. He said that Discovery would invest about US$600 million in these ventures annually “in the sense of short-term P&L losses”, a doubling of the 2019 figure.

Discovery generated US$700 million in OTT and “next-gen” revenues last year

Zaslav reiterated that Discovery was moving ahead with its plan of “aggregating our brands into an OTT service here in the US”, which he said was a major focus of our management and me”.

He said that “while being mindful of the balance and importance of the linear pay TV business, we are positioned to create dual revenue stream direct-to-consumer platforms”

Discovery posted revenues of US$2.874 billion for Q4, up 2%. Net income was up to US$476 million, though OIBDA declined by 8% to US$1.105 billion.