Interview: Mark Hollinger President & CEO, DNI

As Discovery’s international business continues to grow in importance, head of international networks Mark Hollinger spoke to Stuart Thomson about the broadcaster’s plans.

Discovery Communications’ international business is growing in strength relative to its maturing US business, driven by strong subscriber and advertising growth in emerging markets such as central and eastern Europe and Latin America.
Speaking to Digital TV Europe after the broadcaster’s ‘Upfront’ presentation to advertisers in New York in April, international chief Mark Hollinger said that the day when international revenues surpassed domestic turnover was still a few years off.  Nevertheless, he said, growth in international markets was faster than that in the US.
With that in mind, in the EMEA region, Discovery has recently restructured its operations, creating a western European arm (including the broadcaster’s largest international market, the UK) under Dee Forbes and a CEEMEA (central and eastern Europe, the Middle East and Africa) unit under Katarzyna Kieli. “As we really looked at the EMEA region we saw that there was wide variety of markets. There is a natural split between the more mature markets of western Europe and the still developing markets of CEEMEA,” says Hollinger. “[Western Europe includes] markets where we don’t necessarily think there is going to be a huge increase in pay penetration, either because they’re already fully penetrated or because of other factors. The CEEMEA market is characterized by higher subscriber growth and we really need two different kinds of management. Western Europe is about the programming mix, scheduling and knowing that you don’t have a lot of upside on subscriber growth. The East is more sales-driven, and the management there are sales people by background and orientation.”

The launch of female-skewed channel TLC in the US and later internationally was designed to provide  a more rounded proposition to advertisers – an increasingly important constituency to Discovery. The broadcaster has expanded from its original core proposition to embody a wide range of loosely factually-based genres, encompassing channels as diverse as The Discovery Channel and Animal Planet, ID, TLC and most recently OWN (the Oprah Winfrey Network). Hollinger points out that Discovery has already experimented with a channel focused on acquired scripted content in Latin America, where it operates Liv (formerly People+Arts, a joint venture with BBC Worldwide). While he admits that Discovery is faced with the question of whether “the non-fiction sandbox is big enough for us”, Hollinger says the company is unlikely to transform itself into a general entertainment content provider, however. In the case of Liv, it made sense to experiment with a different proposition in a particular market. Similarly, the company will look at opportunities to launch US services including OWN internationally on a case-by-case basis. Discovery is also open to acquiring channels.

However, Hollinger also indicates that a shift in emphasis is taking place from the era when broadcasters looked to acquire as much digital shelf-space as possible through the launch of multiple channels (a strategy he says suited Discovery, which owns the rights to the majority of the content it airs) to an era when broadband offerings and migration to HD (and even 3D) are seen as increasingly important. Discovery may look to launch 3D services internationally as part of video-on-demand offerings rather than attempt to replicate the launch of its 3Net joint venture with Sony in markets outside the US. (Discovery launched 3Net in the US in February.) Hollinger says: “Internationally we monitor this all the time. Right now it may be that a full channel is not the next path to take. It may be a VOD product for a while, but when there is a need we will be there with a channel.”

Although broadband is growing in importance, Hollinger is not tempted by direct-to-consumer over-the-top opportunities. Discovery remains firmly rooted in the traditional pay TV business (although it has opted to deploy free-to-air services in markets including Germany and Italy). “We are firm believers in the pay TV business model,” he says. The established relationship between programmer and distributor “has created huge value for us,” he says. In terms of forward-looking digital distribution opportunities, he says he is more attracted to the TV Anywhere model being built by existing pay TV service providers than by the pure-play advertising or subscription-based over-the-top model. “The pay TV operators want to make sure they are not undermining their own business model so we are better aligned with them,” he says. OTT, by contrast, is still characterized by the absence of a clear business model and by lack of audience measurability. Pay TV allied to advertising is a model that has served Discovery well enough to date.

“We are firm believers in the pay TV business model…[that] has
created huge value for us.”