JB Perrette, Discovery’s president and CEO of streaming and international, acknowledged the company’s struggles in the sports arena even as it has gained scale in recent years.
“We’ve learned a lot over the last eight years, and we’ve made a lot of mistakes, frankly, in doing it in the sports space in particular,” the exec said during an online appearance at a streaming conference hosted by Wall Street research firm MoffettNathanson. “We’ve been trying for years to figure out” EuroSport Player, the direct-to-consumer service available across Europe, added.
Perrette, who previously had a lengthy tenure at NBC and helped launch Hulu, called sports a “hamster wheel” because of its constant need to lure viewers with fresh, expensive programming.
Discovery acquired control of EuroSport in 2015 after being a partner with TF1 Group in the property starting in 2012. While EuroSport has Olympics rights in some territories through 2024 and is fairly well-penetrated, its stand-alone streaming service is being discontinued as Discovery+ becomes more of a strategic focus.
“How do you make sports something other than a pay-per-view business? It becomes very challenging from a churn perspective, which is why we decided to collapse our EuroSport business into our Discovery+ product,” Perrette said. Over the past six months, as the stand-alone offering has been phased out, subscriber engagement and retention have improved on Discovery+ in Europe, he added.
Michael Nathanson, who moderated the session with colleague Robert Fishman, took Discovery’s proposed merger with WarnerMedia off the table as a topic given the pending regulatory review of the deal. Discovery and AT&T announced plans in May for the $43 billion combination, which they expect to close in mid-2022. Undeterred by Nathanson’s caveat, Perrette noted, “We’ll have a very unique proposition in a Warner-Discovery world in terms of a premium sports tier, an incredibly strong entertainment product, and local content coming out of the U.S.”
Perrette was asked about the current view on bundling various streaming offerings, a playbook that Disney has executed successfully with its Disney+/ESPN+/Hulu combination. Discovery CEO David Zaslav has said all options are on the table in terms of WarnerMedia, which launched HBO Max in 2020, a few months before the rollout of Discovery+ began.
When combined with HBO’s linear footprint, HBO Max is at 69.4 million global subscribers. Discovery in November reported 20 million total streaming subscribers, but did not break out how many are on Discovery+ compared with more targeted services like Food Network Kitchen.
A bundle “can serve as an acquisition driver, which is obviously great,” Perrette said. “It serves as a retention driver as well … if you have the right set of rights, if you’re working with an eight-to-nine-month season, as opposed to a two-week event” like the Olympics. “You can keep the people in the tent and generally, with the entertainment over the hiatus period, whether it’s two months, three months between seasons, keep them engaged and not wanting to switch off the subscription because they have all this other great content at their fingertips.”
Possessed of a lengthy resume both in streaming and global operations, Perrette expressed informed and forceful views of the distribution landcape in Europe compared with the U.S. “Based on my Hulu background, I’ve always thought in Europe the broadcasters generally are hurting themselves by fragmenting and each having their own service. In a world of globalization and giants, it’s not going to end well if they continue to keep their own individual plays. It’s a scaled business and it’s going to be very hard for them to make the technology investment, make the engineering investment, and then out-market these other services. Plus, I forgot to mention the content investment.”
Those dynamics helped inform Discovery’s 2019 decision to launch a joint streaming venture with Germany’s ProSieben called Joyn, Perrette said. Those efforts to scale up remain unusual, though. “It’s irrational, but broadcasters still want to do their own thing,” he said. “While I don’t think it’s necessarily the winning strategy, it’s very hard to get people off of that mindset because it seems counter-intuitive. They feel like they’re going to give up control.”
Joyn is one of the leading ad-supported services in Germany, Perrette said, but as Discovery+ continues to evolve “with the Warner future,” its status will be evaluated. “It was a great experiment and it’s worked very well,” he said, “but where does it fit in? That’s something we have to figure out.”
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