Zaslav Likes Oprah, Online

9/16/2010 4:06 PM Eastern

Discovery Communications CEO David Zaslav said Thursday that he would embrace online delivery of content if it could be monetized, and reiterated that the upcoming launch of the Oprah Winfrey Network could mean a big boost in carriage fees.
Discovery has been slow to embrace online content delivery, instead opting to use its web sites to deliver snippets of video aimed at driving viewership of its TV channels. Speaking at the Bank of America Merrill Lynch Media, Communications & Entertainment conference in Newport Beach, Calif., Zaslav said that could change with the onset of TV Everywhere,and an ability to monetize that content.
"Our deals provide that distributors have the right to our content through to the TV set," Zaslav said. "We have been very careful about not putting our content out onto other platforms when the economic model doesn't support it. TV Everywhere is actually something we are very encouraged by. If we can get our content through TV Everywhere authorized out onto the web and Nielsen can measure it or someone can measure it so we can monetize it, it would be very attractive."
While TV Everywhere offers a future revenue opportunity, Zaslav was equally encouraged by the impact the January launch of OWN could have on carriage fees for the network.
Zaslav said that currently Discovery Health - which OWN is essentially taking over - gets minuscule carriage fees compared to other Discovery networks (SNL Kagan estimates the channel gets an average of 12 cents per subscriber per month from distributors). That should change once Oprah takes control.
"We think there is a meaningful opportunity if we can build a strong network with the Oprah brand and all the resources that we're putting on it," Zaslav said. "We're bringing a lot of value to the cable industry - Oprah herself coming to cable is a big value. If we can build that, our position is that we should be able to get value over time. We are having discussions with distributors now and those are ongoing."
Zaslav wouldn't say what the network will be asking for in carriage fees. Several reports have estimated the network could attract between 40 cents and 50 cents per subscriber per month.
Zaslav was also encouraged by what he characterized as a strong upfront market, which should drive increases in advertising. He added that ad revenue was up 13% in the second quarter and guidance for the third quarter was for another 13% or more increase.
"We will be [up] more," Zaslav said.
The Discovery CEO also had high praise for the ID: Investigation Discovery network which he said is the fastest growing networks in the Discover Communications fold. And while he said that all of Discovery's networks are profitable, FitTV and Military Channel may undergo some changes in the future.
"Some of our channels we are trying to figure out what's the best use," Zaslav said. "They are profitable today and if we had our way we would build those channels ourselves. FitTV and Military are two of the channels that we're trying to think of, for now they're profitable but what could they be to have a bigger audience, a stronger brand, a bigger contribution. We have been investing less in those channels as we look at our opportunities either with a joint venture opportunity, which we would only do if we thought that somebody brought something to the table that would make the channel that was significantly more valuable, like an Oprah or Hasbro."

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