LONDON — While Europe continues to grapple with the fallout from the economic crisis, one of the U.S.’ best known cable networks is putting the finishing touches on a Continental spending spree that’s part of a plan to develop a companywide footprint beyond its longtime niche.
For Discovery, a network better known for sharks than sitcoms, the Scandinavian investment represents an experiment of sorts, because for the first time, its channels will be broadcasting general entertainment and scripted fare.
Discovery Networks Intl. president and CEO Mark Hollinger says Discovery’s international infrastructure has reached the point where it can support a broad number of channels.
“Do you simply populate (these additional networks) with factual channels, or can you use that platform for other types of networks?” is one of the questions Hollinger says Discovery has been asking itself.
As if to answer, at the same time as the SBS buy, DNI announced the $222 million purchase of 20% of specialty web Eurosport from French broadcaster TFI, with an option to buy a majority of the sports provider in two years. DNI also added four French pay TV channels: TV Breizh, Histoire, Ushuaia TV and Stylia.
A similar scenario played out in Italy in January, when Discovery bought Italian broadcaster Switchover Media for an undisclosed sum. The move made DNI the third-biggest broadcaster in Italy, after RAI and Mediaset. Discovery now owns six pay and six free-to-air channels in Italy.
“We’ve looked at a ton of assets, but in most cases we just couldn’t get to the finish line,” Discovery CEO David Zaslav says. “With these deals, the aim is to accelerate our already fast pace of international growth.”
When Zaslav joined the Silver Spring, Md.-based company six and a half years ago, Discovery’s international activities generated profits of $159 million. By 2011, that number had more than quadrupled, to $721 million.
Discovery has found international success by concentrating on market share.
With growth in pay TV across Europe relatively flat, it is offering premium content and adding free-to-air channels to existing pay portfolios in countries like Germany, Italy and Spain.
Hollinger, a Discovery veteran of 21 years, and his content chief, Luis Silberwasser, who recently re-located from Miami to London, are cagey about their plans to maximize value from the new assets.
“The SBS acquisition looks like a big change, but we feel it is the next iteration of growth for us,” Hollinger says. “We have a bigger palette to paint on.”
Outside the U.S., Discovery is morphing into an ambitious broadcaster that tailors different business models to local markets, and is reaching out beyond the factual space into entertainment and sports.
For instance, in most of its international markets, Discovery operates between six and 11 channels, playing on different demographic groups.
In France, the company owned just two channels, one of the reasons it acquired the four pay networks and tied-up with TFI. The initiative gives DNI the kind of dual revenue streams it likes — pay TV coin and potentially lucrative local ad revenues.
From a global perspective, the Eurosport stake offers, arguably, the best long-term growth prospects: The network concentrates on secondary sports like cycling rather than expensive marquee draws such as English Premier League soccer. It operates in 59 countries, with anywhere from one to four channels in each.
Ultimately the hope is that when the European economy finally revives, Discovery will be in pole position to benefit from the uptick, provided the cable net continues to grow its market share.
“We’ve been very successful in international TV,” Hollinger says, “but it’s important we are always alert to what other opportunities might exist. There is a real imperative to invest internationally.”