Discovery unconcerned by Netflix’s accelerating unscripted efforts

Discovery is planning to launch a new channel and possible streaming service with Chip and Joanna Gaines. (HGTV/Discovery Inc.)

Discovery Inc.’s bread and butter is unscripted television, and the company has content with competitors in that space like Netflix. But Discovery doesn’t sound overly concerned.

When asked about competition in unscripted from companies including Amazon Prime, HBO, Showtime and Netflix, Discovery CEO David Zaslav said his company’s programming around food, travel, home improvement and true crime are all growing.

“We’re seeing growth in those areas and it’s what we do,” said Zaslav. “When people go to HBO, Showtime, Amazon Prime and Netflix, they’re really going for something else. They’re paying $10 to $15 for scripted movies and series; that’s what the brand is.”

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He said that once viewers are done with scripted series or films, that’s the end of their engagement with it. He pointed toward Discovery’s programming in categories like golf, cycling, food, natural history and home improvement as drivers of further engagement, whether that’s retail opportunities or extended digital content.

“We’re in these categories where people will watch and then do. And that’s why we bought the cycling business and that’s why we got in with the PGA,” said Zaslav. “We’re in an environment where we’re a real market leader, we’re differentiated and we have this opportunity in this ‘watch and do’ that can create a real opportunity to build businesses in these funnels.”

RELATED: Discovery sees huge Q3 revenue boost from Scripps acquisition

Netflix has moved further into buying its own unscripted series. Last year at an investor conference, Netflix Chief Content Officer Ted Sarandos said that’s in part because licensing unscripted from ad-supported programmers makes for an awkward transition when the commercials are taken out on Netflix.

“After the commercial break, they recap everything you just watched. When you put them on Netflix and strip the commercials out, it’s ridiculous. It’s like seven minutes of a show. On Netflix, when we produce a 30-minute unscripted show it’s 30 minutes of programming with no catching up because we figure you’ll remember what you just saw,” Sarandos said.

But Sarandos even admitted that Netflix’s unscripted content is not necessarily pulling in new subscribers to the platform or giving them reason to stick with Netflix.

Discovery last year doubled down on unscripted content when it completed its acquisition of Scripps and took control of networks including HGTV, Food Network and Travel Channel. That transaction is helping drive huge earnings boosts for the company.

Discovery’s fourth-quarter revenues of $2.8 billion increased 51% year over year and adjusted OIBDA increased 86% to $1.2 billion year over year. The company saw similar increases for the full year. But on a pro forma basis, after removing the impact of the Scripps and other transactions while accounting for the sale of Discovery’s education and other business, growth figures for Discovery were much more modest.

Looking ahead, Discovery is planning on launching a new linear channel for Chip and Joanna Gaines, who previously starred in HGTV's "Fixer Upper." The company said that it is also looking at direct-to-consumer streaming service options for that channel.

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