Q&A: Discovery's David Zaslav

Oprah, streaming, going public on his mind ahead of CTAM
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Cable marketers convene in Boston Nov. 9-11 for the annual Cable & Telecommunications Association for Marketing (CTAM) confab, and as the cable industry spreads into ancillary businesses, CTAM's canvas has grown, too. The summit will dive into examining several new marketing strategies.

The last session, on Nov. 11 at 12:15 p.m., brings together some of the best-known thinkers in the business, including Real Networks founder Rob Glaser, cable analyst Jessica Reif Cohen, Cablevision COO Tom Rutledge, Canoe Ventures' David Verklin and David Zaslav, the president and CEO of Discovery Communications. Zaslav last week spoke with David Goetzl about what he's thinking about heading into CTAM, including Discovery going public and the Oprah Winfrey Network. (On an earnings call last week, Zaslav said he expects Winfrey to discontinue her syndicated talk show in 2011 and then join OWN. However, a rep from Winfrey's Harpo Productions said in a statement that Winfrey "has not made a final decision" beyond 2011. More here)

You are about to finish your second year on the job and have made much-discussed changes in focus, personnel and content in that short time. Will the next two years yield such dramatic change?

I think there will be a lot of change. What makes the media business exciting is it’s filled with change. Over the last few years people have started to consume content on new platforms and we need to focus on that. We also have a number of new brands that we’re pushing in OWN: The Oprah Winfrey Network and last year we launched ID: Investigation Discovery and Planet Green.

We want to continue to grow our existing channels -- Discovery, TLC and Animal Planet -- and build these new brands. And we have a big global ambition to try to take advantage of the platforms we have in over 170 countries around the world. And to take our library, which consists of 20 years of great content, and figure out how to use that on new platforms in order to continue to grow market share and grow audience. 


How satisfying is it to complete the process of becoming a fully public company and is the principal benefit having currency for acquisitions, particularly in the online space?

Going public has been a good learning experience for me. I spent 20 years at NBC in the cable and new media space -- and this has been fun to learn a lot about being a public company. So on a personal level, it’s been a lot of fun.

Strategically, it’s a nice advantage for us because it does give us a currency. It also allows us more flexibility in terms of going to the capital markets. And it’s helpful as we look to get the best people working with Discovery Communications -- that we have a clean stock where we can offer stock options like some of our competitors.

For those reasons, I think it’s going to be a meaningful step forward for us. And as we look to grow our company, our focus is going to be to grow with our internal assets. But as we look outside the company, we’ll be looking at any assets in the nonfiction space and looking for opportunities to grow market share.


Do you find yourself checking the stock price a few times a day?

Our focus is really to grow our audience, to build the business metrics of our company, and to build brands. We view this as long term -- to build long-term sustainable growth. And eventually, I think over time we’ll build a much bigger and stronger asset, but we’re not focused on the stock price.


Does having a dual revenue stream for your networks provide at least some relief as the ad market slows?

If you look at the characteristics of our business, we’re pretty unique in that 50% of our revenue as a company comes from subscriber fees, which gives us some more sturdiness. We also have geographic diversity -- a third of our revenue comes from outside the U.S. We’re in over 170 countries and in many of those countries, there’s still meaningful subscriber growth.

And in addition, we own most of our content and we can use that content across all of our platforms -- our cable platforms around the world and new platforms like mobile and the Web. So, I think we’re well-positioned and we have a sturdier model than a lot of other media companies. We are a pure cable company essentially.


As distributors hunger for more and more HD networks, are you increasingly optimistic you can negotiate more favorable carriage deals since your programming has such strong appeal in the format?

(Discovery founder and chairman) John Hendricks launched the first HD channel, Discovery HD Theater, which is still the most highly distributed HD channel in America. And we were very early. About a year and a half ago, we started shooting most of our content in HD and we went out into the market.

We have commitments from almost all distributors for six HD channels here in the U.S. – Discovery, Science Channel, Animal Planet, TLC, Planet Green, while The Oprah Winfrey Network will be in HD when we launch. And we’re now in 23 countries in HD as well. Our stuff looks great in HD and we’re hoping to maintain that advantage. 


You have channels in more than 170 countries. Does that serve partly as a buffer in the current economic climate in that while some parts of the world may be struggling others are growing?

It certainly gives us diversity and in our international business more than 65% of our revenue is subscriber-fee revenue. That’s a strength. In addition, while there are certain countries like the U.K., France and Italy that are dealing with recession, there are a number of markets in Central and Eastern Europe that are still growing, particularly on the sub and advertising side. And so geographic diversity does give us a little bit more stability.


How transformative will the launch of The Oprah Winfrey Network be for you next year?

When we think about Oprah Winfrey, it’s one of the strongest brands in media. Oprah.com is a great site with a very strong audience. And the ability to launch a channel in over 70 million homes gives us a great opportunity to reinforce a very strong brand and a strong message of “Live Your Best Life.” We think the brand will stand for something very meaningful to a lot of people over time if we’re successful.


How involved will Oprah herself be in the programming decisions?

Oprah’s been very involved. It has her name on it. She’s engaged. She has a great sense for talent and she’s on a mission with us to build a fantastic brand.


What is your assessment of Planet Green six months after launch?

Strong brand. It has a great connection to Discovery. It stands for a lot of our values. And we think it’s off to a very good start.


You created a stir with recent comments that streaming full episodes of your shows on the Internet doesn’t make for a sound business strategy? Why did you take that position after so many of your peers have embraced it, including your former employer NBC Universal?

Because I believe it. Because I’ve spent a lot of time looking at the economics. If you take out a pen and you add it up, there’s not a lot of economics there. The business model is not that strong.

In addition, we are a pure cable business and we get substantial value by distributing our content on dual-revenue-stream platforms, domestically and around the world.

We’ve been able to take the best of our content and use pieces of it through HowStuffWorks.com or on our other sites. And we’ve been able to build a very strong connection with our viewers, and there’s no reason for us to take a fire hose and take a fantastically valuable library and make it available on the Web for free .

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