Discovery cruises its way to direct-to-consumer in an ‘SUV’

Discovery's direct-to-consumer streaming service was likened to an SUV that will drive on the road already blazed by others. (Getty Images)

Discovery CEO David Zaslav spent a lot of time on today’s Q2 2020 earnings call, motoring around the subject of Discovery’s direct-to-consumer plans.

Discovery is devising a streaming video service that aggregates IP from all its brands. In March, the company hired former Google executive Neil Chugani to formulate the financial strategy in the direct-to-consumer space.

RELATED: Discovery hires former Google exec to lead strategy for direct-to-consumer

Today, Zaslov used a road analogy to describe the direct-to-consumer video marketplace and referred to Discovery’s future product as an “SUV.”

“There are some strong players out there that have built a great road to this direct-to-consumer business,” he said, citing Netflix, Amazon Prime and Disney Plus. Zaslov said “it was hard work” in the early days to get people to pay for streaming content but now “people are comfortable with that.”

It’s not at all clear what kind of direct-to-consumer offering Discovery is manufacturing. Zaslov would only give hints. He said the most popular OTT providers deliver scripted series and movies that are super expensive to produce. “Effectively, they built a road, and they all have great sports cars,” he said, referring to the scripted content.

But he said Discovery has “a new SUV” that it will be rolling out “very soon” with more detail. “Our SUV is filled with large fresh content, a huge amount of original content.” He said the content on this new offering would be useful to consumers on a daily basis, making it sound pretty similar to the most popular content already on Discovery, such as TLC, HGTV and the Food Network.

He also stressed that it would focus on characters that its viewers love, and this character-focus would differentiate Discovery’s direct-to-consumer offering. “We have this ability to curate through brands and through characters that people already know,” he said.

Discovery has been "very quietly aggregating content,” Zaslav said. "You should expect that we'll be offering our content in ways that are competitive in terms of whether they have commercials or don't have commercials, or how much commercials they have. We've thought that out carefully, and we intend for our product to be very competitive and flexible.”

He also said Discovery would have multiple partners, domestically and around the world.

RELATED: Discovery, Starz team on Dplay streaming service in Middle East, Africa

The timing is still unclear. Zaslav said the company was putting “finishing touches on bringing an aggregated direct-to-consumer product to the market here in the United States,” and it's also making enhancements to its SVOD offerings like Dplay in many markets around the globe.

The Q2 vitals

In terms of Discovery’s Q2 earnings, against the backdrop of the global pandemic, the company reported total revenues of $2.54 billion, a decrease of 12% compared to the prior year quarter.

U.S. distribution revenues increased 7%, or increased 2% excluding certain non-recurring items, and advertising revenues decreased 14%, while international distribution revenues decreased 2% and advertising revenues decreased 37%. Net income available to Discovery was $271 million, and diluted EPS was $0.40 per share.

The company plans to resume share repurchases in the second half of the year.

During the first half of 2020, Discovery completed renewals with four major distributors: Cox, Charter, Comcast and Sky.

Suggested Articles

Alan Wolk, co-founder and lead analyst at TV[R]EV, breaks down the new Peacock-Roku agreement and Quibi's potential sale.

Best Buy has formed a strategic partnership with streaming service provider Philo, a first of its kind in the electronic retailer’s history.

Roku finally landed Peacock and now the company has positioned itself for some potential long-term gains.