Discovery To Go Direct To Consumers With Streaming Service

Discovery, Inc. DISCA is one of the largest media companies in the U.S. and among the largest in the world.

The company has stated recently it doesn’t get the valuation from cable companies it thinks it deserves.

This could be why Discovery has been pushing toward building a direct-to-consumer streaming platform that will launch soon, according to a Deadline report. 

What to Know: Discovery is the owner of hit brands like Discovery, HGTV, Food Network, TLC, Investigation Discovery, Travel Channel, MotorTrend, Animal Planet and Science Channel.

The company also has the joint venture OWN — Oprah Winfrey Network — and will launch a joint venture with Chip and Joanna Gaines, Magnolia Network. The company is the No. 1 global media company outside the United States.

On its Aug. 5 second quarter earnings call, Discovery CEO David Zaslav used an automotive metaphor to compare his company to the “SUV of brands” versus "sports cars" like Netflix, Inc. NFLX, Amazon.com, Inc. AMZN and The Walt Disney Company DIS.

Rivals have laid the groundwork, and Discovery will be successful thanks to its impressive stable of brands, the CEO said. 

Why It’s Important: TLC ratings hit an all-time high in the second quarter.

This network, along with HGTV and Food Network, continue to be dominant in key women-targeted demographics.

The company has a 20% market share for women watching prime time television. In the second quarter, Discovery owned four of the top 10 pay television channels in primetime with TLC, HGTV, Discovery and Food Network.

With many strong brands, Discovery has the content to power its own streaming service.

The company has yet to go into specifics on whether the streaming service will be free and ad-supported or subscription-based.

A question about the inclusion of Magnolia Network also wasn’t answered on the earnings call. 

Discovery said it renewed four contracts during the second quarter for distribution. This are: Charter Communications CHTR, Cox, and Comcast Corporation CMCSA in the United States, and Sky in the United Kingdom.

Despite strong live viewership, the company still believes it is undervalued versus peers when it comes to carriage deals. Discovery believes it can increase rates as renewals come up, but is counting instead on other areas for revenue growth.

Shares of Discovery are down 33% in 2020. The company, like many media companies, has been hurt by not being able to air all of its live programming, and the advertising market has weakened due to budget cuts.

Internationally, the company missed out on airing the 2020 Summer Olympics, for which it has the European broadcast rights. 

What’s Next: Along with going direct to consumers with a new streaming service, Discovery is betting more heavily on advertising revenue.

The company launched OneGraph, a unified advertising platform for audiences across linear and digital platforms. The new platform uses proprietary data and harnesses the power of Discovery’s large market share in certain demographics. The platform can break down data across 50 main audience segments.

Discovery is playing to its strengths here, with a heavier focus on controlling the advertising market it can directly control.