Extreme Discovery

What's in a name? Ask Billy Campbell. Discovery Networks U.S.'s boss was so troubled by the Discovery Home & Leisure Channel slug he ordered a redesign. "Leisure" made him think of 1970s suits, Travel & Leisure magazine, and pastimes like bowling. He worried that viewers were equally lost.

No more. Now it's simply the Discovery Home Channel, pegged to the hearth and entertaining—and offering more original fare.

Campbell is doing some digital housecleaning, too.

He's sprucing up all of Discovery's digital channels—or emerging networks, the company's preferred term. "They aren't tiny networks any more," says Campbell, who took over two years ago. "We're trying to distinguish them."

To date, the Science Channel and Discovery Times Channel have been renovated. Discovery Kids runs on NBC's Saturday mornings, giving it added exposure. Several of the channels now have a dedicated general manager. And Campbell is stressing original programming and marketing, less rerun Discovery material. There's still one makeover left: Discovery Wings. The channel's theme is aviation, but Wings will likely envelop history and technology.

Why the emphasis on digital?

The newer channels are a growth engine within the Discovery empire. "Discovery's digital networks have been somewhat off the radar," says Fulcrum Capital media analyst Rich Greenfield. "But, as digital is growing, they are ahead of most." About one-third of cable subscribers have upgraded to digital, roughly 30 million homes, and most receive the Discovery services.

Thirty million subscribers is a magic number; it opens the door to Nielsen ratings. "Ratings are a huge plus," says Carat USA media buyer Andy Donchin. "Then we know who we're reaching." Science Channel and Discovery Times Channel are already getting partial ratings (tracking between a 0.1 and 0.2 rating) and should publish full ratings later this year. Discovery Health Channel, a digital and analog hybrid in 52 million homes, is already rated, averaging a 0.2 in prime.

When the first channels launched in 1996, "people thought Discovery was crazy," says founder and Chairman John Hendricks. "We recognized the digital platform offered an opportunity to develop new brands, and we jumped on it."

Two years ago, The New York Times Co. ponied up $100 million for a 50% stake in Discovery Times Channel, formerly Discovery Civilization. And Morgan Stanley media analyst Richard Bilotti estimates the diginets will turn a first-time profit, a modest $3 million, this year. (Discovery Channel hauled in a $444 million profit.) But projections are robust. Bilotti estimates the diginets will see a $57 million profit by 2008. Plus, advertising will help fuel future gains.

In fact, within five years, Campbell expects that the digital suite will be a solid contributor to Discovery's coffers. But first he has to turn the channels into destinations.

The digital suite was always a long-term play for Discovery, a real estate investment. In the mid 1990s, as digital cable was beginning, MSOs were desperate for content to populate their new packages. Discovery created some clone niche networks ("videozines") and, as a result, locked up digital space—a clever way to deploy Discovery's vast library.

Yet pumping up the channels does pose a risk: They could cannibalize Discovery's analog networks. But Campbell believes a Discovery fan can watch four different sister nets. "Our goal is to have a more additive audience, not an audience shift."

To strengthen the diginets, Campbell envisions signature shows and personalities. It's the same tactic he used to revive Discovery Channel, which so far has produced hit American Chopper and its stars, the colorful Tuttle family. One catch: The digital channels are programmed on a shoestring. Each has about $10 million per year for programming, according to Kagan Research. Discovery and TLC spend more like $100 million each.

That doesn't deter Science Channel General Manager Steve Burns. He's plotting 18 new series and specials for next season. "It is a lot like the early days of Discovery," says Burns, Discovery Channel's former head of production. "You do a lot with a little, keep quality up, and hope pretty soon people will catch on."

Discovery's emerging channels are discarding some reruns in favor of first-run original shows, such as FitTV magazine show Urban Fitness TV. Discovery Times is up to 50% originals, says General Manager Vivian Schiller, including new documentary series Off to War. "To grow into a mature network," she says, "we have to develop series."

As the smaller Discovery channels become buyers, their general managers are fielding more pitches. Producers and talent are still assessing the channels, trying to understand the new directions. Some ideas click, says Discovery Home General Manager David Karp, citing upcoming Picture Perfect, home makeovers done from magazine pictures.

But others are bizarre. He was pitched cooking show Road Kill Grill, nude culinary program Cooking in the Raw, and makeover show Design by Hypnosis. But he's still listening. Says Karp, "Sometimes the most off-the-wall person might be the personality you're looking for."