By Benjamin Mullin 

Discovery Inc. said it would launch a new streaming service that will include shows from all of its major cable networks, a move that follows the media company's earlier strategy of offering smaller, thematic plans catering to groups from foodies to home-improvement enthusiasts.

The new streaming service, Discovery+, which will launch in the U.S. on Jan. 4, will cost $4.99 a month with ads and $6.99 without, the company said Wednesday. It will feature content from channels including TLC, Food Network, Discovery Channel and Animal Planet. The service will also include library programming licensed from other companies, including the BBC, A&E Networks and Group Nine Media.

Discovery has struck an agreement with Verizon Communications Inc. to provide the streaming service free to the wireless company's U.S. customers for a year, with Verizon and Discovery sharing the cost of those subscriptions, according to people familiar with the deal.

Discovery is launching a streaming service months after some of its biggest competitors. Chief Executive David Zaslav is betting that Discovery, one of the biggest traditional TV companies, can compete for subscribers with the likes of Comcast Corp.'s Peacock, AT&T Inc.'s HBO Max and Amazon.com Inc.'s Prime Video by offering most of its cable-TV shows directly to video-streaming subscribers.

At stake is the long-term future of Discovery. Viewers by the millions are abandoning traditional pay TV for streaming services, imperiling the lucrative licensing fees that cable and satellite companies pay to cable network owners. Almost every major TV programmer, including Comcast Corp.'s NBCUniversal, ViacomCBS Inc. and WarnerMedia, have launched their own streaming services in an effort to reach those viewers.

Discovery's streaming strategy used to be radically different from its competitors. In an interview last year, Mr. Zaslav said he wanted to slice and package Discovery's various offerings into niche streaming plans: Food Network Kitchen for home chefs, a home-improvement service for fans of home improvement gurus Chip and Joanna Gaines, and packages centering on specific sports such as golf and cycling.

Mr. Zaslav said this week that Discovery already has 5 million paying subscribers globally across all of its streaming services.

He said Discovery made the decision to offer a comprehensive streaming service after the company surveyed consumers and found that they wanted a one-stop nonfiction streaming destination to complement the fiction-heavy Netflix and Disney+.

Late last year, Mr. Zaslav wanted a second opinion on that plan. So, he invited his old friend, media mogul Barry Diller, out for lunch. Over poached salmon and chopped salad at the Grill in Midtown Manhattan, Mr. Diller rendered his verdict: It could work. But to be successful, Discovery would have to go big.

"I told him Discovery could own nonfiction programming and be an essential streaming service -- about the only one that could have a chance at competing with Netflix profitably," Mr. Diller said in an email.

Mr. Zaslav said that now is a perfect time for Discovery to launch its service because potential subscribers are used to paying for streaming, and they are looking for new shows.

"They've spent a lot of time viewing content on these platforms, and they're trying to figure out, 'what do I watch next?'" he said.

Michael Nathanson, a media analyst for MoffettNathanson, said Discovery+'s long-term viability would hinge on whether its original programming is popular enough to draw new subscribers and whether cable and satellite companies respond negatively to the service during Discovery's next round of carriage negotiations.

"The question people will have is, is there a risk of cannibalization of the channels when Discovery's distributor deals are up?" Mr. Nathanson said.

Traditional TV programmers like Discovery have to walk a fine line when developing their streaming services to avoid souring relationships with cable and satellite TV programmers. Those companies pay billions of dollars for the rights to show programming that traditional TV networks are increasingly selling directly to consumers at a fraction of the cost of a cable subscription, potentially cannibalizing the pay-TV audience.

Discovery aims to solve this problem by keeping new seasons of many shows on its traditional TV channels exclusively for a window of time, ensuring that they are still valuable for cable and satellite companies, according to a person familiar with the matter. Discovery plans to experiment with putting some shows from its cable networks on Discovery+ concurrently. Meanwhile, Discovery has greenlighted dozens of original reality shows, documentaries, true-crime shows and home-improvement series to distinguish Discovery+ from its cable networks.

The original shows include "90 Day Bares All," a companion series to the TLC show "90 Day Fiancé," an updated version of "Fixer Upper" with Mr. and Mrs. Gaines and "Bobby and Giada in Italy," a culinary tour of Italy with celebrity chefs Bobby Flay and Giada De Laurentiis.

Discovery's direct-to-consumer division had a management shake-up earlier this year. Peter Faricy, a former Amazon executive who was CEO of Discovery's streaming division, left the company in June.

Discovery will lose between $200 million and $300 million more on its direct-to-consumer offerings in 2021 than it did in 2020, according to a person familiar with the matter. A spokesman for Discovery declined to say how much money the company's direct-to-consumer services lost in 2020, noting that the company withdrew its financial guidance earlier this year when the World Health Organization declared the coronavirus had become a pandemic.

Verizon decided to strike the deal with Discovery in part because the company's streaming service allowed the wireless giant to provide its customers with a portfolio of content they otherwise might not have convenient access to, said Ronan Dunne, executive vice president and CEO of Verizon Consumer Group.

Mr. Dunne said that Verizon's deals with content providers such as Discovery ultimately reduce the number of consumers who abandon their wireless subscriptions.

Write to Benjamin Mullin at Benjamin.Mullin@wsj.com

 

(END) Dow Jones Newswires

December 02, 2020 12:18 ET (17:18 GMT)

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