Discovery CFO says cheaper version of Discovery+ draws more revenue

Discovery+
The success of Discovery's ad-supported streaming service in the U.S. has generated consideration within the company for a similar tier in other markets. (Discovery+)(Discovery Inc.)

A cheaper, ad-supported version of Discovery+ is drawing more revenue per user compared to a more expensive version of the streaming service that lacks commercial interruptions, the company's chief financial officer revealed at an investor conference this week.

In an interview during Bank of America's Media, Communications & Entertainment Conference on Monday, Discovery CFO Gunnar Wiedenfels said he predicted competing streaming services that offer both ad-supported and ad-free tiers were "experiencing similar metrics of performance," but added that it didn't necessarily convince Discovery that a completely free, ad-supported version of Discovery+ was the right approach. 

Gunnar Wiedenfels
Gunnar Wiedenfels

"We believe that our content, and the content of the combined company, will be valuable enough to merit a subscription payment on an ongoing basis," Wiedenfels said. He later added: "Whether, at some point, there may be a completely, AVOD-only, subscription-free product, that remains to be seen."

In August, Discovery said its direct-to-consumer streaming services had a combined 18 million subscribers, though that figure included several international products. Without getting into specific numbers, the company said the majority of those subscribers were from Discovery+, its premiere standalone streaming service that launched in early January.

Wiedenfels said the success of Discovery's ad-supported streaming service in the United States has generated consideration within the company for a similar tier in other markets. It has already distributed a version of Discovery+ in some European markets, including the United Kingdom, where Vodafone served as an early launch partner. There, some Vodafone customers get complementary access to Discovery+ based on their service level; a similar promotion exists in the United States for Verizon customers.

RELATED: Amazon, Discovery+ lead new SVOD subscriber acquisition in Q2: Kantar

Asked about how those content distribution deals shake out, Wiedenfels said they help get a fledgling streaming service like Discovery+ in front of more people.

"It's a great way to accelerate your path to scale," he remarked. "It obviously comes at a price — you're sharing some of the economics, initially, but on the other hand, you're also able to save on marketing expenses, so that's why we've leaned heavily into distribution partnerships."

So far, Wiedenfels says the company has found success through its partnerships with wireless providers, and it's pleased with how those marketing initiatives have turned out.

"We've seen great uptake of direct-to-consumer from those partnership deals, and we're very happy with that as well," he said.

Discovery and WarnerMedia

Perhaps strengthening the viewpoint that its content will always be able to command a subscription payment is the anticipated merger between Discovery and WarnerMedia. The deal, which is expected to be consummated next year at a cost of $43 billion, will marry the fact-based content library of Discovery and its affiliated businesses — Animal Planet, Science Channel, Food Network, etc. — with WarnerMedia's deep catalog of films and television programs as well as the linear channels of both companies.

The deal could also lead Discovery to pursue more opportunities for live sports across its linear channels and streaming services. Discovery's pan-European sports network, Eurosport, currently has the exclusive broadcast and streaming rights to the Olympic Games in 50 European countries through 2024. Earlier this year, WarnerMedia's current parent company AT&T announced it secured broadcast and streaming rights to National Hockey League games, which were largely exclusive to Comcast's NBCUniversal under a previous deal. (The rights to NHL games are shared with the Walt Disney Company.)

"Both WarnerMedia and Discovery have had a pretty rational approach to sports rights — finding deal structures that work...maybe not going for the top-tier events that are massive loss-leaders, but going for sports that have their place in a broader portfolio," Wiedenfels remarked.

"I would imagine that our position gets better after combining the two companies," Wiedenfels noted, adding that it might help the companies secure better sports deals down the line.