Forgive yourself if, after listening to Discovery’s earnings call last week, you checked the calendar to make sure it was still 2020 and you hadn’t traveled back in time.
CEO David Zaslav previewed a planned subscription streaming service, which he likened to a “new SUV” for its ability to pack in the company’s many brands.
The details were few, but what the man dubbed “Zaz” did share essentially boiled down to the same old same old: yet another premium subscription service in a world already saturated with them, with promises of exclusive content for existing fans of Discovery’s networks.
In other words, a cash grab aimed at loyal linear viewers, whom, by the way, Discovery has announced plans to keep charging more via affiliate fees passed on in their cable bills.
VIP’s view is that Zaslav and Discovery aren’t just late to the subscription streaming party, but the SUV is driving in the wrong direction.
Perhaps Zaslav was too preoccupied with the acquisition of Scripps Networks back in 2017-18 to consider launching a streaming service before it was cool. But that acquisition closed on March 6, 2018, leaving considerable time to prepare for a launch.
This is something that all of Discovery’s rivals managed to do in the meantime, leaving it the only major U.S. media group without a real streaming presence. The lag was likely a factor in the June departure of erstwhile Amazon exec Peter Faricy, who had been leading the plod to market.
During the earnings call, Zaslav touted how Discovery’s service will be different (he could hardly say it would be run of the mill, after all). Utilizing the strong linear performance of its best-performing channel brand, TLC, the service will be one of the only streamers with a focus on unscripted content and will seek to lure in viewers already splurging for cable with a promise of more of the content they love.
Whether this will end up being a case of biting the hand that feeds Discovery, pushing viewers to a streaming-only universe and foregoing the current affiliate fee revenue stream, remains to be seen.
In fairness, Zaslav has accurately seen the future. Household reach of his networks has been declining since at least 2014. And while plans to keep raising affiliate fees for the remaining TV subscribers are akin to wringing every last drop out of a wet rag, the belated announcement of a major streaming presence shows Zaslav wants to keep Discovery going into the 2020s and ’30s.
But VIP’s view is there is a much better alternative available to Zaslav than launching yet another me-too SVOD service.
Discovery’s content across its networks is geared toward capturing, and ensnaring, linear viewers, who ultimately keep watching for hours at a time. This was the method that saw networks like ID and TLC reach new heights in the 2010s, and it was the reason Food Network and HGTV were such a good fit.
Instead of jettisoning this network culture for on-demand streaming, Zaslav should instead embrace a rising streaming format: FAST.
Free Ad-Supported Streaming TV services, such as Pluto TV, The Roku Channel and Xumo (see VIP’s detailed report), are a growing phenomenon. Featuring linear channels that users can scroll through, much like the cable TV guide, they have been generating interest, with Comcast purchasing Xumo and launching Peacock with a FAST component and Amazon highly rumored to be entering the market.
Pluto is a great case study for Zaslav and Discovery. While it had over 15 million monthly users when ViacomCBS acquired the service in January 2019, it had taken Pluto since 2014 to achieve that many.
The integration with Viacom’s many unscripted-based networks (a content similarity Zaslav should not ignore) has seen Pluto add a further 10.9 million users in 18 months, highlighting the power of big media brands acting as audience lures in this emerging area.
Where Discovery has a built-in advantage is its sheer scale. In the last decade, Discovery’s many networks released close to 4,000 new shows. This level of content is immense and would be able to feed literally hundreds of linear FAST channels.
It should be noted that Discovery is already treating some of its existing linear networks in the same way that FAST networks would be — i.e., reruns only. Since the Scripps acquisition, networks that used to have original content, such as AHC, Destination America and Great American Country, have been repurposed as vehicles designed to promote new episodes on their corporate bigger siblings.
If Discovery is hellbent on having some sort of premium offering, then VIP would recommend following Peacock’s model to a degree. Having a free linear FAST service with 50 Discovery-themed networks would be a great baseline audience lure, with upsells available for more content and originals, ad-supported or ad-free.
By creating a premium free streaming option, much as Discovery already operates free linear channels abroad in territories such as the U.K., Zaslav would be showing an understanding that viewers cannot be squeezed forever.
It would also signal that the CEO recognizes a Discovery-branded subscription service would have to battle considerably in a fast-maturing market. By focusing upon releasing the built-in value in existing content and launching a serious FAST service, Zaslav would be laying the foundation for significant ad revenue in years to come. And his would be among the first wave of media companies embracing free streaming, instead of being the last to enter paid.