Discovery Channel's Global Strategy Takes It to the Top of Ratings

Discovery Channel's global strategy takes it to the top of ratings
CEO David Zaslev explains why he is glad to be welcoming Oprah to the world of the subscription market In June 1985, the Discovery Channel launched in the US. It had only 156,000 subscribers and no original programmes. This month, Discovery Communications celebrated its 25th anniversary – now the world's number one non-fiction media company, with 1.5bn subscribers in 170 countries. The secret to its success, says its president and CEO David Zaslav, is simple.
"Discovery at its core, as a company, and the Discovery Channel itself, is really about quality content that satisfies curiosity," says Zaslav. "That is our niche, that's what we do best. It sounds like a simple phrase but it really is what differentiates us from a number of other media companies." Zaslav has been in charge at Discovery since the beginning of 2007. During his time he has focussed on three important issues; developing Discovery's programme content - building its library of programmes; consolidating the US channels, as well as building its international business. "When Discovery is at its best, when we do programmes like Deadliest Catch, that series works everywhere around the world," says Zaslav. "That's economic leverage, so we really try to lean into that. When we invest in content, our focus is also to create something that will have some real shelf life "we're building a library."
Zaslav says that his company has benefited from being an almost entirely "pure-play" cable television company, with revenues from subscribers as well as advertising "About 95pc of our company is in the cable dual-revenue stream. We're not in a lot of the other areas of media that are facing more challenges both technological and competitive," says Zaslav. "About 50pc of our revenue is subscriber revenue from Pay-TV platform providers such as SKY and Star, which gives us some real stability – usually three- to five-year deals, locked in." The rest is advertising revenue.
While some European TV channels scramble to give their programmes away online, Zaslav says that he won't be following them. "We've been pretty outspoken about not putting our long-form content on the web," he says. "We still believe that the best platform to watch long-form content is the television set. The idea of offering free content on the web, particularly when you're in the video content business when it's very expensive to produce, is not a very good model".
Since he joined Discovery, growth has been largely organic, without major acquisitions. He says he isn't opposed to an acquisition strategy in principle, and that the company's strong balance sheet would help with any purchase. "We're always opportunistically looking to grow by acquisition," he says. "But we haven't found any yet."
Where Discovery has found opportunities for non-organic growth is with joint ventures, three of which are coming to fruition in the next few months. Later this year, the Discovery Kids channel in the US will mutate into The Hub – a joint venture with toy manufacturer Hasbro, which will utilise Hasbro's brands including Scrabble and Trivial Pursuit.
Even more high-profile is Discovery's deal with Oprah Winfrey, which will see the jointly-owned Oprah Winfrey Network (OWN) take the place of the Discovery Health Channel on US screens next January. It will feature Winfrey's own daily talk show, and the joint venture will include her website, oprah.com. With up to $100m of Discovery's money riding on the venture, Zaslav needs it to succeed - and, he says, he's confident it will.
" The last of Zaslav's big joint ventures straddles both content and technology, partnering with Sony and Imax to create a dedicated 3D television network, which will launch next year in the US. "One focus of Discovery has been to really lead with technology. The better the picture, the better our content looks," says Zaslav. "So with HD, as you start to move to technology that gets you closer to real – that's where we think we have an additional market advantage. "We're now the leader in HD around the world, with over 80 countries in HD.
But when he looks forward to Discovery's potential for growth over the next five years, Zaslav comes back to a much simpler and more traditional set of aspirations. "People tend to watch eight or 10 channels. That hasn't changed. Today, in most markets, two or maybe three of those channels are Discovery Communications channels. In five years, if we do a good job, we hope that maybe four or five of those channels will be our channels," he says. "And that's the fight we're in."