Using the French Open as a backdrop, Discovery executives gathered at Roland Garros in Paris this morning to tubthump the company’s international growth and show off Eurosport, the pan-regional sports platform it has now controlled for a year. Discovery CEO David Zaslav was joined by JB Perrette, President of Discovery Networks International, and Peter Hutton, CEO of Eurosport, which has rights to the French Open in 55 countries and a vast production set-up here.
Zaslav led a wide-ranging talk during which he declared he’s “never been more optimistic about the content business” — particularly internationally. Discovery is “a very different company than we were 10 years ago. We have great content, IP and better platforms than any media company in the world. We’re on a journey that feels like we’re just getting started.”
Zaslav has a lot at stake in presentations like the one today. Discovery stock is treading water in 2015 and underperforming the S&P. The exec has to persuade Wall Street that there’s a Discovery difference — and he says it’s in his growing offshore strategy. That strategy comes with risks given the strong dollar, and weakening economies in some major markets — topics which Zaslav discussed with me on the sidelines of the presentation.
With nearly 3 billion subscribers in over 220 countries, Discovery’s business is now 55% outside the U.S. where it is showing growth at a rate of about 20% per year in the past five, Zaslav said today. His bullishness is in line with remarks he made late last month which appeared slightly more skeptical than usual about growth prospects for domestic television, as Deadline’s David Lieberman reported at the time. Today, he told me the U.S. is “still good, but it’s so competitive” with hundreds of cable channels and other outlets vying for eyeballs and ad dollars. Across Europe, with its differing local tastes and myriad languages, Discovery has tailored itself to individual markets. One of the big advantages, he noted at a press conference earlier in the day, is that Discovery owns all of its content in 52 languages — “that’s a differentiator.”
Nevertheless, the current strength of the greenback versus the euro, pound, ruble and other currencies has been a “big challenge,” Zaslav told me. But, it’s “good and bad.” On the negative side, “our growth has been undermined by the rise of the dollar.” On the plus, it will be well-positioned if there is a turn, and, “The cost of assets has come down 15%.” Does that mean Discovery will be aggressively acquisitive in the near term? “Selective” was Zaslav’s word, “if an opportunity presents itself.” With Liberty Global, Discovery acquired UK production giant All3Media last year. “We saw a real opportunity to build more scale in ownership of content and IP.”
Carriage fees have also come down in Europe, but Zaslav remarked, “Because outside the U.S. we are driven by growth and we have more scale, we are driving much harder on price. We’ve been able to fight for broader carriage but also higher pricing.” In the morning session, Zaslav contended, “If your share is going up double digits and we’re investing more significantly in content, there’s a strong equitable case that people are spending more time with our channels. When we sit with distributors we can present that argument win-win.” I later asked him if that could potentially offset any impact on Discovery’s carriage fee position in the U.S. With so much of its business now overseas, “sure, it could,” he said.
The under-penetrated Latin American market particularly presents an opportunity. It’s essentially “where America was 15 years ago. Ad dollars are moving to cable… It will be on automatic for a period of time,” Zaslav told me. Discovery is well established in Lat Am with its kids business leading the market, which is one where family fare is heartily embraced. As the world changes, “Kids is the first IP to move, together with sports… The strength of sports makes us very formidable for today and for tomorrow,” the CEO said.
Speaking of sports rights in Europe, Zaslav noted that in the U.S., football, basketball, baseball and hockey are “almost like oxygen. If you don’t have them, you can’t live. There are four players fighting over those four sports only. Here in Europe, there’s only one media company that has a platform that reaches all of Europe.”
Premier League and World Cup soccer are arguably the Holy Grail on this continent. But, Zaslav says, “Let the big guns fight about soccer. Beneath that we can be dominant.” Eurosport buys soccer rights off-market, so, when Sky Deutschland takes the Bundesliga in Germany, for example, Eurosport can go in and grab the rights elsewhere — as it recently did in Turkey. In a series of deals today, Eurosport announced it had acquired Wimbledon in Belgium, making that the only market where it has all four Grand Slam tennis tourneys. It also notably acquired exclusive TV and digital rights to the UEFA Europa League in Sweden, Norway, Denmark and Singapore, as well as 2015 World Cup Rugby rights in Germany.
Hutton this morning threw out some ratings numbers to back Eurosport’s growth in Europe: +21% in the UK and +18% in Germany in the first five months of 2015. There is a focus on more production of companion content to go with the live events; putting shows in primetime and bringing in marquee talent — Chris Everett and John McEnroe are the faces of the French Open here for the group.
Eurosport has brought an advantage to Discovery, Zaslav believes. “When we put Eurosport on top of 10 Discovery channels, what does that do for your overall ad sales? Eurosport together with the whole bouquet of assets will significantly drive the growth of the whole boat.”
On the digital side, the Eurosport Player is re-launching on June 10 in 52 markets, just in time for the 24-hour Le Mans endurance race which will be covered live in its entirety. “OTT and delivering content direct to viewers is clearly big part of our future,” Hutton said.
Also this morning, along with the usual clip reels, two new projects were highlighted: Racing Extinction, a documentary from the team behind The Cove to expose the hidden world of endangered species and the race to protect them; and Harley-Davidson, the scripted series about the founding of the iconic motorcycle brand.
Of scripted, Zaslav said, “We love Harley-Davidson because we think its global. We turn down a lot of content that we think would work, but it’s too local. We picked Harley-Davidson because we think it could work everywhere in the world.” But, “Scripted is getting crowded. It’s not where most of our incremental dollars are going.”