Discovery CEO David Zaslav seemed more skeptical than usual about the growth prospects for U.S. television in his appearance this morning before investors at the Bernstein Annual Strategic Decisions Conference. He provided a dreary report about everything from domestic advertising to content sales as he talked up Discovery’s international growth efforts.
Zaslav described the current upfront ad sales market as “pretty good, but not great” as the number of orders ebbs. “We’re not fully monetizing our ratings points,” he says. “The volume is not what we’d like it to be” — although it’s “significantly better” than it was in Q4.
The anemia partly reflects what he sees as a Nielsen problem as it catches up with people who watch TV shows on mobile and digital devices. “It’s critical that it gets measured, and that hasn’t been the case,” he says. “There’s stuff falling off the table that we’re not getting credit for.” (Nielsen, for its part, says it measures digital viewing but the networks’ and advertisers’ ratings rules require the company to exclude them from its ratings.)
But he also cited discouraging trends in the domestic business, including the movement of ad dollars to digital media. “In the long term the trend in viewership on TV is down slightly, subscribers are down slightly… I don’t see the U.S. turning into a high growth market.” He added that “it’s gotten tougher here in the U.S. It’s going to continue to be a slog here.”
The rest of the globe has trouble, too. “We have a malaise around the world on the advertising side. If you look at economic growth, it aligns with advertising.” The strong dollar contributes to Discovery’s woes when it repatriates funds generated overseas.
Still, there’s “a big difference between what we’re seeing here in the U.S. and what we’re seeing in the other 229 countries” where Discovery operates. “Outside the U.S. we’re still seeing double digit growth” especially as local content providers cut their spending. “Latin America is a rocket ship…driving Latin America becomes a big piece of the growth engine. But we do see Europe as a growth market” as well.
That has shaped Discovery’s content decisions. “We don’t program for the U.S….There are a lot of shows that we don’t do because they’ll only work in the U.S.” For example, “if we go to the Grand Canyon, it won’t work in Chile, or Egypt or South Africa.” He says that’s a reason why Discovery’s ratings flattened in the U.S. — but were up more than 10% around the world.
Zaslav also questioned the prospects for scripted TV content — which has thrived lately with dollars from syndication deals to subscription VOD [SVOD] digital venues including Netflix and Amazon. “Everyone ran there,” he says, “but in the meantime the SVOD model is changing. …More and more they’re saying, ‘why should I buy a scripted series that ran on a cable network? I’ll build my own’.”
So, did cable programmers make a mistake by selling their shows to venues that don’t have ads, and don’t use their brands. “Yes, we did.” In a few years “I don’t think those dollars are going to be there by those SVOD players.”