Discovery prepped for ‘one step back and two forward’ as it pivots to streaming future

Discovery is prepared to “take one step back and two forward” as it pivots towards a streaming future internationally, according to CEO David Zaslav.

Speaking on Discovery’s latest quarterly earnings call, Zaslav hinted that Discovery was prepared to go further in sacrificing near-term licensing revenue to aggregate its content into a  compelling direct-to-consumer play.

Asked about the position of Eurosport in Discovery’s streaming plans internationally, Zaslav said that the company had a huge advantage over rivals by owning local sports rights in Europe as well as broader international rights like the PGA.

“we have the ability, like we did in Denmark, to say, hey, we might be able to take one step back and two forward, how would it work if we opportunistically take all of our local content, all of our local sport and go-to-market?,” said Zaslav.

Zaslav said that a split strategy of licensing content to other distributors overseas and running a non-exclusive streaming offering alongside that probably did not make sense.

“You certainly make more near-term money. But we think it’s dilutive and it’s confusing,” he said.

David Zaslav

Discovery plans to unveil details of its streaming plans in December, but Zaslav said that the company had the advantage of owning rights to its own content in overseas markets and was also prepared to invest significantly in local content – two advantages over rival companies.

“We think we really have a free cash flow machine that will continue for a very long period of time to generate real return with great margins, but then we’ll be investing thoughtfully and knowledgeably across the globe [and] we’ve been holding our global content to go at it,” he said.

“And now we’re going to go about it in a way that we think is quite unique. I’ve said for a long time [that it’s about] local content.”

He said that Discovery was “looking at this opportunity to add local sport, and in some cases, it could also be local news”.

Zaslav cited Discovery’s plans to offer new combined streaming service, Discovery+, which will replace Dplay, in the UK in partnership with Sky, as an example the company could follow elsewhere.

Discovery exceeded expectations with its Q3 revenues, with sales down 5% at constant currency to US$2.56 billion and adjusted OIBDA down 14% to US$954 million.