Discovery Holding On to TV Everywhere Rights

Sub fees push OWN closer to breakeven

By Jon Lafayette -- Broadcasting & Cable, 2/14/2013 1:37:19 PM

While other programmers are closing comprehensive distribution deals in which cable subscribers can watch shows on multiple devices, Discovery Communications says it has been holding on to its TV Everywhere rights.

The company added that its money-losing joint venture with Oprah Winfrey, OWN, was on track to break even in the second half of this year, partly because the channel is now receiving sub fees from nearly all of its distributors.

Discovery on Thursday reported its fourth-quarter results, including a 2% increase in distribution revenue. During the earnings call with analysts, CEO David Zaslav talked about doing new rights deals that should ramp up subscriber revenue.

He added that it was important to note that Discovery did not give any TV Everywhere rights as part of those deals.

"We couldn't determine what the right value was," Zaslav said. "I think there is a decent chance we'll do some TV Everywhere deals over the next few months."

Those rights present a "valuable opportunity," he said.

TV Everywhere rights could either be negotiated separately or rolled into a new, comprehensive distribution deal.

"There could be deals that are up next year, the year after in 2015 or 2016 where a distributor wants TV Everywhere rights, where we could either do it independently or we might decide to roll forward a whole new deal as a part of that," Zaslav said.

Zaslav said some distributors are looking to offer their own version of subscription VOD to compete with Netflix. "The fact that some operators want to get into the SVOD business is another bite at the apple in addition to TV Everywhere, but we haven't given any SVOD rights. We haven't given anyone TV Everywhere rights. We've given limited VOD, which has been our operandi here from the beginning," he said.

OWN ratings have been growing since its disastrous launch, which featured expensive flops and a management turnover.  "With OWN generating real audience growth and with support from all of our original advertisers, and all of our affiliate deals completed now except for one distributor, we are fully on track to reach our previously stated goal of cash flow breakeven during the second half of this year," Zaslav told the analysts.

"This was a channel that had no sub fees; virtually no sub fees when we entered into this business, and today we've done deals with every operator in America except for one, paying sub fees that started on Jan. 1. And so we feel very good about it," he said.