Discovery Still Waiting before It Starts TV Everywhere, New SVOD Dealmaking
Discovery Communications has yet to give pay-TV distributors so-called “TV Everywhere” rights and has similarly turned down their offers to license the pay-TV programmer’s shows to Netflix-like subscription-VOD (SVOD) platforms, CEO David Zaslav told analysts Thursday. Though the company reached some carriage agreements in 2012, they did not include TV Everywhere rights, he said. “We could not determine what the right value was,” he said. “It was amicable but we agreed to in this case to table it.” Discovery has been among the few major programmers that doesn’t stream full-length shows online (CD Aug 15 p3).
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Discovery has declined some pay-TV distributors’ request to include its content on online VOD services that would compete with Netflix, Zaslav said. “The fact that some operators want to get into the SVOD business is another bite at the apple in addition to TV Everywhere,” he said. “But we haven’t given any SVOD rights, we haven’t given any TV Everywhere rights, and we've given limited [traditional] VOD rights, which has been our modus operandi from the beginning."
One thing holding Discovery back is the lack of ability to measure viewers on all platforms of TV Everywhere, Zaslav said: “It needs to be measured.” As it stands, when a show is viewed on a tablet, Discovery wouldn’t get credit for that viewer from Nielsen, he said. It’s still not clear which entity will benefit most from such deals, TV distributors or networks, he said. “There is real value in us providing that, and the operators agree with that,” he said. “We just need to figure out how to apportion that value, and we haven’t yet agreed on how to do that."
Even without TV Everywhere rights, Discovery expects to get more money from distributors, Zaslav said. Its networks’ market share has grown as a percentage of total pay-TV viewing, he said. And the company could do some TV Everywhere deals this year, independent of its broader carriage agreement renewals, he said. “There’s a definite chance we'll do some TV Everywhere deals over the next few months,” he said. “But the good news is there is no distributor in the U.S. that has TV Everywhere rights for our content, and given that we're almost 10 percent of viewership on cable, I think that is a very valuable opportunity."
Q4 sales at Discovery increased 8 percent to $1.2 billion from a the year-ago quarter, the company said in a news release (http://bit.ly/X8wtlI). Sales at its domestic networks increased 4 percent to $703 million on stronger ad sales, while international revenue gained 15 percent to $462 million. Ad sales can continue to increase domestically, Zaslav said. Broadcast-TV networks still charge a much higher rate than Discovery’s cable networks on a cost-per-thousand impression basis, he said. “We've seen more and more money coming to cable, and we have seen that spread every year get a little smaller,” he said. “That will be the sustained wind at our backs as we continue to grow market share as an industry -- more of the [ad] dollars should come to us at better pricing.” Net income fell 33 percent to $224 million on higher income tax provisions.