Discovery plans OTT expansion in Europe

Discovery Communications plans to expand its Nordic over-the-top service Dplay to more European markets this year and grow its online Eurosport Player by taking more sports rights.

Announcing the plans of Discovery’s fourth quarter earnings call, company president and CEO David Zaslav also said that Discovery plans to acquire “specialty rights at a low cost” to strengthen its OTT Eurosport Player offering, and aims to deploy Dplay to additional markets outside Norway, Denmark, Sweden and Finland.

Zaslav also said that though Discovery is committed to partnering with pay TV operators in the US to support the ‘TV Everywhere’ ecosystem, if this doesn’t develop “the way it should” in years to come then channel providers may be forced to go direct to consumers.

“In Europe, we’ve gained subscriptions, valuable insights and a new marketing and sales platform with our own direct-to-consumer products. One is Dplay in the Nordics and the other is the Eurosport Player, which we distribute across the continent,” said Zaslav.

“Those services have almost 250,000 subscribers, bringing in an average of US$8 per month. Our European OTT offerings is giving us a growing revenue stream, a growing direct-to-consumer offering and valuable learnings that we can apply in the US and other markets.”

The Discovery boss said that the firm has seen spikes in sign-ups for its subscription Eurosport OTT ahead of major events like the Tour De France and the Australian Open, but this is “not affecting our viewership on Eurosport at all”. He said the extra coverage provided by the online service appealing to ‘superfans.’

He highlighted sports and kids content as “probably the two areas that most lend themselves to a superfan and the direct-to-consumer [model]”, and said there could be an opportunity to monetise this in Latin America.

In terms of TV Everywhere, Zaslav said that the distribution deals Discovery signed last year with US partners including Suddenlink, Cablevision, NTTC and Mediacom, which was announced this week, all offer subscribers authenticated access to Discovery content inside and outside the home.

“Here in the US we are hoping that TV Everywhere continues to grow,” said Zaslav. “I think that the ecosystem here in the US is going to stay basically as it is for the next three years.

“The question is four, five, six years from now, will there be a peel off of this direct-to-consumer business? I think mostly in the US, if TV Everywhere doesn’t develop the way that it should, which would be a positive for all of us, it will require all of us to go directly to [the] consumer, because the cable guys aren’t getting it done.”

This comes after a strong international performance helped Discovery to post increased revenues, though net income dropped by 13% compared to last year.

Announcing its full year and fourth quarter results, Discovery reported Q4 revenues of US$1.67 billion. This was up 9%, over the fourth quarter a year ago, led by 17% growth at International Networks, with Discovery’s US networks growing by just 1%.

Fourth quarter net income came to US$250 million compared to US$289 million in Q4 2013, which Discovery attributed to higher restructuring costs and lower equity earnings.

“Despite a more challenging US market and significant foreign currency headwinds, our content portfolio once again drove audience gains and boosted our market share around the world,” said Zaslav.

“As we move into 2015, we are confident that our long-term content investment strategy, strong global IP and brands, and local approach to markets will continue to drive our results and enable us to deliver additional value to shareholders.

Internationally, Discovery said that in Q4 distribution revenues were up 24% and advertising revenues were up 7%, though changes in foreign currency exchange rates reduced fourth quarter international revenue growth by 10%.

Discovery took a controlling stake in Eurosport International in May 2014, which was listed as a ‘newly acquired business’. First quarter results from SBS Nordic were also new, as Discovery acquired this in April 2013.

Earlier this week, Discovery said that its portfolio of international channels reached 654 million viewers in Q4, a 4% year-on-year increase and its highest-ever international reach.

Announcing the figures ahead of its earnings announcement, Discovery said it had a “record-setting quarter and year” with its channels and brands receiving a 10% full-year increase in average audience compared to 2013. In Q4 alone its average audience increased by 13% year-on-year to 3.2 million.