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Zaslav: Content Owners Poised to Reap Big Gains

Zaslav: Content Owners Poised to Reap Big Gains 12/09/2012 7:00 PM Eastern

Discovery Communications CEO David Zaslav said the next two years will be the best ever for programmers, with increased opportunities on online platforms like Netflix and Amazon.com and with international and domestic advertising gains ahead.

“At least for the short term — the next two to three years — I think you’ll see substantial incremental growth from most content owners that own their own content and have both the ability to window it and move it around the world,” Zaslav said at the UBS Global Media and Communications conference in New York.

While Discovery has cut windowing deals with Netflix and Amazon — basically giving them access to Discovery content that is a 18 months old or older — Zaslav doesn’t see a TV Everywhere deal in the programmer’s near future.

“TV Everywhere would be a closer window, and for us I think it’s a good thing,” Zaslav said. But until a reliable ratings measurement tool is developed and distributors ascribe a higher value to TV Everywhere content, “we’re going to stay back.”

INVESTING IN ID

Zaslav underlined Discovery’s investment in channels like ID: Investigation Discovery, which has grown into a top 10 network in just four years. But only about 30% of pay TV customers that have the ID channel actually know they have it, he said.

Over the next two years Discovery plans to “lean in on the ID brand to let more people know they have it,” Zaslav said. “We think it can be even bigger.”

He hopes to boost ID from its current 82 million homes to 90 million or more. Those additional 8 million homes could mean a substantial gain in viewership and advertising dollars, he said.

Discovery also has seen growth in older networks like Animal Planet, which has risen from a No. 35 ranked channel several years ago to No. 18 this year. “Animal Planet has definitely gone to the next level,” Zaslav said.

The Oprah Winfrey Network, having overcome some early ratings problems, has turned the corner, he said, with Winfrey talking a stronger on-air and behind-the-scenes role and the inclusion of content from popular producer Tyler Perry. OWN will launch two new Perry shows in the spring with more expected in later years.

Zaslav said OWN will break even in the second half of next year and won’t require the same level of investment as it has in the past.

Zaslav said he was optimistic about the advertising market: it appears good at the moment, but could change if the economy turns for the worse.

Internationally, Discovery continues to perform. Its 149 networks are currently available in 209 countries and territories. Zaslav sees substantial growth in Latin America, where penetration rates are still low, and even in Western Europe.

Even though the advertising market in Western Europe has been down as much as 10%, Zaslav said, Discovery has increased revenue by adding channels. The programmer has about 11 channels in Italy, for example, and added two new channels in Russia, bringing its total there to 10.

“Having substantial channels on low tiers in growth markets will be a big piece of the growth we see in years ahead,” Zaslav said.

LOWE: FOOD’S ON RISE

At the same conference, Scripps Networks Interactive chairman and CEO Ken Lowe said he expects the flagship Food Network to morph into a $1 billion performer in the next few years. He said he’d be disappointed if Food didn’t top that revenue mark in two to three years.

Per Scripps 2011 annual report, Food tallied about $745 million in total revenue in 2011, up about 12.1% from the year before. In the first nine months of 2012, the it reported revenue of about $616 million, up 13.8% from the prior year.

Lowe said he sees Travel Channel as SNI’s biggest growth opportunity. Scripps bought the network in 2009 for about $1 billion.

The priority for the next few years will be to boost Travel’s hours of programming — at between 400 and 450 hours per year it airs about half the 850 annual hours of HGTV and Food. “It takes a while to build a brand. Plenty of people never imagined Food would be a top 10 network,” Lowe said, adding that Travel has the attributes to easily be a top-15 network.

Lowe said investors should look to see Scripps continue to invest in programming across the board. “It is the lifeblood of what we do.”

TAKEAWAY

Opportunities from such online platforms as Amazon.com and Netflix should boost content owners over the next two years, says Discovery’s David Zaslav.

September