Discovery Sets Streaming Strategy As VOD Future Beckons

Over-the-top products could go direct-to-consumer

Why This Matters

Both online and linear networks need to get more crafty to get people to sit through spots.

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As the TV world turns less linear and more on-demand, Discovery Communications is experimenting with ways to make its content more accessible to more consumers.

The international nonfiction content company is now considering whether to convert two over-the-top products now being distributed through Amazon Prime into direct-to-consumer services.

And in Europe, it has increased the number of subscribers to its sports programming by packaging individual sports and individual events.

“Right now, the smart content companies like Discovery want to put our content everywhere consumers want to consume it,” chief commercial officer Paul Guyardo said.

Guyardo stressed that Discovery continues to push its traditional business through traditional distributors.

“You still have over 90 million homes in America that still subscribe to some form of cable, and so we’re strengthening our core brands like Discovery and TLC and ID and Animal Planet,” he said. “They will always be on cable and cable’s not going away.”

But in addition to upgrading its cable-network content, Discovery is giving pay TV subscribers more access to content through the Go apps it has created for each of its U.S. networks. Those streaming apps have proved particularly popular with the young viewers cable networks are finding increasingly elusive in a digital era.

Spinning Off SVOD

In the U.S., Discovery last year launched two subscription products via Amazon Prime. One, spun off from Investigation Discovery, is True Crime Files. The other, from Destination America, is called Destination Unknown. A third such service, based on its Science channel, could be launched shortly.

Discovery’s agreement with Amazon prevents him from providing subscriber numbers, according to Guyardo. “But I will tell you we are very pleased with the results,” he said.

The company is now determining whether or not to go direct to consumers with an offering like True Crime Files.

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Like ID, the top-rated network among women 25 to 65, True Crime Files has the large, passionate fan base that genre of programming tends to attract. Some fans will watch a mystery on TV and rewatch it again and again on the app, searching for missed clues.

Guyardo wouldn’t provide a timeline for when a direct-to-consumer product could be launched.

“We’re in exploratory mode right now,” he said. “Our focus has been to experiment with other type of content on Amazon Prime and then put together a plan.”

Owning the Relationship

Rather than expanding True Crime Files by making it available on other platforms, such as Roku or Apple TV, Guyardo said his bias is to go directly to consumers in a way that Discovery would own the consumer relationships.

That requires setting up a legitimate sales and marketing engine like the one Guyardo oversaw at satellite-TV provider DirecTV. “That takes time to build, and obviously subscription services take time to build, and it takes a lot of money to market them,” he said.

“Our strategy will not be a broad-based service,” Guyardo said. “We would focus more on narrow and deep ‘Super Fan’ verticals.”

Aiming products at passionate viewers is one way to build subscriptions and keep churn down. In Europe, where Guyardo oversees Eurosport’s digital offerings, packages that offer a bundle of sports have been phased out. Rather, Eurosport now offers “passes” that allow viewers to follow a favorite sport: there are season passes, an event pass that covers a particular tournament and even a day pass. The strategy has boosted consumer growth by 75%, Guyardo said.

Direct-to-consumer efforts like Discovery’s at this point are at most experimental and aren’t generating significant revenue, Pivotal Research Group analyst Brian Wieser of Pivotal Research Group said. “It’s all pretty small at this point in time."

But while Discovery is learning about direct-to-consumer approaches, it is focusing on strengthening its traditional pay-TV business.

Discovery has built a Go App for each of its U.S. networks and those streaming apps have been downloaded 6½ million times. App viewing is incremental because most streaming viewers are 18 to 34 year olds who don’t view any cable channels.

“It’s telling us our content is very relevant for a younger audience,” Guyardo said. “We just had to put it one a different platform for them to consume it.”

The streaming is generating revenue. On Discovery’s last earnings call, it said advertising on the app contributed one percentage point in incremental ad revenue. Discovery CEO David Zaslav told an analyst last week that could soon go up to 2%.

The apps also help get renewed distribution, Guyardo said, because they offer real value to MVPDs, who haven’t had success with their own apps. Plus, Discovery owns all of its content and can offer viewers all episodes of every series, anywhere and at any time, he said, and anything short of that can be frustrating for the consumer. In fact, Guyardo contended that if apps like Discovery’s were available years ago, Netflix and Hulu wouldn’t be such a threat today.

“It was because the industry was so late to the game in coming together with a really quality TV Everywhere app like the one that we’ve launched that, I think, some of these disrupters have been able to make so much progress,” he said.

What’s next? “I think you will see the successful content companies like Discovery will be the ones that stop thinking of themselves as long-form linear cable networks and start thinking of themselves as fantastic brand that produce long-form, mid-form and short-form content, distributing them on a variety of platforms,” he said. “You just have to be there and let the consumer tell you where to go next.”