Deeper Dive—Amazon and Discovery bake deep synergy into new cooking SVOD

Food Network Kitchen launches in late October. (Discovery, Inc.)(Discovery Inc.)

Discovery has long been talking about “view and do” as a core tenant of its streaming video strategy. Through a new partnership with Amazon, the company has articulated that idea into a compelling product.

Food Network Kitchen is a subscription video service launching in late October. The app – available on Amazon, Android and iOS devices – will offer some library content from Food Network, but its premise is more focused on live cooking classes and e-commerce. For $6.99/month or $59.99/year ($47.99/year for a limited time), subscribers will get 35 live cooking classes a week, deep Alexa voice integration designed for easier search and controls while in the kitchen, and built-in features for ordering ingredients and having them delivered to the house via Amazon, Peapod or Instacart. Next year, Amazon and Discovery plan to let users order items including cooking equipment through app.

“Think of it as the Peloton of food,” said Discovery CEO David Zaslav during a press conference this week. “Food Network Kitchen is your companion and an extra set of hands while you cook.”

The combination of Discovery’s content – including live classes hosted by well-known Food Network celebrities including Bobby Flay, Martha Stewart, Giada De Laurentiis and Guy Fieri – and Amazon’s voice-enabled Echo devices represents a uniquely synergistic team-up for the companies. Having a video display in the kitchen is made more valuable by getting interactive cooking instruction and tips through it. Being able to operate that display hands-free is essential to being able to cook along with what you’re watching.

There may already be a large installed base of Echo owners ready to get cooking.

Dave Limp, senior vice president of devices and services at Amazon, said that there are more than 100 million Amazon-enabled Alexa endpoints globally, and many of those are in kitchens. He also said that Echo devices with screens is the fastest growing category for Amazon Echo devices overall.

Food Network Kitchen will likely drive more usage on, and could potentially increase sales of Echo Show devices. It will also direct more traffic onto Amazon’s already bustling e-commerce platform.

In the meantime, Discovery will get a piece of every transaction that occurs on the platform. Zaslav said that his company can count on three revenue streams: advertising on the packages that are ordered through the platform and delivered to users; subscription fees; and Discovery’s share of sales made through the platform. There will be a free layer of the service that offers a few of the tutorials and cooking classes on an ad-supported basis, so that’s additional revenue there, too.

UBS analyst John Hodulik said that Food Network Kitchen is a fairly low risk direct-to-consumer opportunity for Discovery compared to what others like Disney and WarnerMedia are doing.

“[Discovery] is not facing a meaningfully increase in content spend or licensing runoff,” wrote Hodulik in a research note. “The cost of launching the service is already accounted in mgmt's guide of $300-400M DTC costs in '19 (though '20 remains uncertain), while any rev upside would be incremental. We see potential for Food and other DTC launches to have a material impact on trends without massive scale (at $6.99/mo only ~1.6M subs needed to offset a 5% decline in traditional subs).”

Peter Faricy, CEO of the global direct-to-consumer business at Discovery, said the service comes with a lengthy three-month free trial because Discovery is trying to build high awareness through the holidays and get a lot of people trying out the product. Discovery also plans to market the service extensively across all its linear channels, both during commercial breaks and via plugs with programming.

Discovery believes the market size is in the tens of millions of subscribers in the U.S. for the service, and the company is plotting international expansion in 2020.

It will be a long time before we know whether Food Network Kitchen is a hit or a flop. For now, though, it seems that Amazon and Discovery have found an interesting way to combine their talents.