DISCK Discovery Inc

By Benjamin Mullin 

Discovery Inc. has expanded its push into subscription streaming TV with a new natural-history-themed video service, part of the media company's bet that consumers will pay a few dollars a month for the nonfiction programming they love.

The company, home to TV channels including Discovery, Food Network and HGTV, plans to slice and package its content into streaming plans catering to everyone from foodies to home-improvement junkies, Discovery Chief Executive David Zaslav said in an interview.

The natural-history service, unveiled Monday, includes content from the British Broadcasting Corp., creating a combined library with titles such as "Planet Earth" and "Blue Planet." Discovery didn't disclose the price, but expects it will cost a few dollars a month.

Mr. Zaslav is planning to launch other services, drawing on the specialties of Discovery's channels. He envisions building the "Peloton of food" that will allow subscribers to take classes with celebrity chefs such as Bobby Flay. Peloton Interactive Inc. sells its customers a stationary workout bike along with a subscription to exercise classes.

Another direct-to-consumer service will focus on Chip and Joanna Gaines, the home-improvement gurus who last year struck a deal with Discovery through their Magnolia company to rebrand and reprogram one of Discovery's smaller cable networks. Discovery has also launched a streaming service focusing on golf, another oriented around its Motor Trend brand as well as one focused on cycling.

"Why can't we be the Netflix of golf?" Mr. Zaslav said. "Why can't we be the cycling Netflix? ...Why can't we be the natural-history Netflix?"

Discovery's piecemeal, low-cost streaming approach comes as consumers are grappling with how to spend their money and time in an increasingly saturated media landscape. According to a survey of 2,000 people conducted by Magid Research in 2018, streaming-video users are willing to pay for a handful of services that cost a total of about $38 a month. Those consumers said they would be willing to subscribe to about six streaming services, on average, the survey said.

Discovery's CEO said it is aiming to win over subscribers whose needs aren't served by major streaming companies like Netflix Inc. and Hulu. Those companies are primarily focused on investing in scripted entertainment programming. AT&T Inc., Apple Inc. and Walt Disney Co. are looking to compete head-on with Netflix and Amazon.com Inc.'s Prime Video.

"The scripted movie packagers are big boats, and they're banging into each other," Mr. Zaslav said. "They're fighting over who can be the widest and who can be the fastest. Right now, we have some great lanes."

Discovery's bet is an expensive one. The company plans to spend hundreds of millions of dollars developing, marketing and operating the services, Mr. Zaslav said. They must each attract and retain subscribers to become profitable.

Mr. Zaslav acknowledged that retaining subscribers was a challenge for Discovery's first streaming business in its early years, underscoring the importance of providing fresh content and honing the company's focus on die-hard fans.

He said Discovery is in a strong position, since it already owns a vast library of intellectual property, which it can use to populate its streaming services. In the entertainment world, by contrast, companies often license content for a certain amount of time or for use in a particular country, making it challenging to acquire perpetual global rights.

A year after the closure of Discovery's $11.9 billion acquisition of Scripps Networks, the parent of Food Network and HGTV, Mr. Zaslav said that he is, in effect, operating two companies: a traditional cable TV business and a nascent direct-to-consumer digital one.

The cable side of Discovery is confronting the reality that growth is downshifting as consumers cut the pay-TV cord. Discovery believes strong execution in the cable business can still allow it to grow in the low- to mid-single digit percentage range annually. The streaming push, if successful, would generate faster-growing revenue streams the company is seeking.

Discovery's stock is up more than 9% so far this year. Last year, Discovery increased its revenue by 54% to $10.5 billion, including the benefit of the Scripps deal. Without the impact of the merger, revenue was up 4% for the year.

In August, Discovery hired Peter Faricy to be chief executive of its global direct-to-consumer unit. Mr. Faricy, a former vice president at Amazon, now shepherds Discovery's U.S. digital products, including Motor Trend and the new natural-history service, which will be available in 2020.

Pricing for the services range from $5 to $20 a month depending on the market, according to a person familiar with the services.

Discovery has already launched several direct-to-consumer services. During the run-up to the 2018 Winter Olympics in Pyeongchang, Discovery signed about 500,000 subscribers to the Eurosport Player, its European sports streaming service, which now has about 1.2 million total subscribers, according to the person. The company paid $1.1 billion to fully acquire the Eurosport television network and agreed to pay $1.4 billion for exclusive European broadcast and digital rights to the Olympic Games from 2018 to 2024.

The services are primarily ad-free, but Discovery is open to exploring a sponsorship model later on, the person said.

The BBC content deal is part of a larger pact that will split up a network of TV channels owned by the BBC and Discovery through their UKTV joint venture.

BBC will pay Discovery about $225 million in exchange for full ownership of the entertainment channels owned by UKTV, including the assumption of about $90 million in debt currently held by the joint venture. Discovery will become the sole owner of UKTV's lifestyle channels, which include Home, Good Food and Really.

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

(END) Dow Jones Newswires

April 01, 2019 06:44 ET (10:44 GMT)

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