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Discovery Holding On to TV Everywhere Rights

Sub fees push OWN closer to breakeven 2/14/2013 01:37:19 PM Eastern

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.

March