Speaker 1: H M. Welcome to Strictly Business, Variety's podcast featuring conversations
Speaker 1: with industry leaders about the business of entertainment. I'm Cynthia Littleton,
Speaker 1: Managing editor of Television for Variety Today. My guest in
Speaker 1: New York is Discovery Inc. President CEO David Zaslov. Zaslov
Speaker 1: has long been known as one of the cable industry's
Speaker 1: biggest booster. He sits atop a large portfolio of lifestyle
Speaker 1: channels that grew this year with the acquisition of Script's networks, Interactive,
Speaker 1: the home of Food Network, h G t V, and
Speaker 1: other blue chip TV brands. What's interesting about this interview
Speaker 1: is the degree to which Zaslov admits that the linear
Speaker 1: channel's business is in slow decline. Discovery is now going
Speaker 1: along in the I P business. Zaslov wants to amass
Speaker 1: content and brands with global appeal that can be sliced
Speaker 1: and diced in many ways for consumers linear and screaming.
Speaker 1: Zaslov offers details about the Script steal and recent investments
Speaker 1: in professional golf and Olympics outside the US. He gives
Speaker 1: a candid look at how his mindset shifted about five
Speaker 1: years ago after he was challenged by none other than
Speaker 1: John Malone, a major Discovery shareholder, to answer the question
Speaker 1: how well would we do if people could watch whatever
Speaker 1: they wanted? David Zaslov, CEO of Discovery, Inc. Thank you
Speaker 1: so much for joining us today. Thank you, Cynthia was
Speaker 1: looking forward to it so as we as two thousand
Speaker 1: eighteen winds down, I look at Discovery, I look at
Speaker 1: your stock has had an incredible run this year, and
Speaker 1: I look at a company that is very different as
Speaker 1: we close out than when you began. Of course, you
Speaker 1: had a big acquisition. You completed the acquisition of Scripts
Speaker 1: Network Interactive, which brought you a lot of great brands
Speaker 1: and talent and channels to put under your big roof.
Speaker 1: You've done a lot of deals, a lot of activity
Speaker 1: overseas in the sport and O T T space, and
Speaker 1: I know you have a lot of you know, you
Speaker 1: have a lot of plans to come for the domestic market.
Speaker 1: Right now, in media, there seems to be a there's
Speaker 1: a there's a pressure on traditional media giants to transform,
Speaker 1: to diversify and transform. Do you feel the pressure to
Speaker 1: transform the business that has been so successful for Discovery
Speaker 1: for the past years, No question, Um, you know, media
Speaker 1: right now is a it's a street fight, and I'm
Speaker 1: a fighter. I love it. I love the business. Well,
Speaker 1: you've got to look for every opportunity to train, You've
Speaker 1: got to look for every opportunity to create some winds
Speaker 1: and momentum. Um. It's been a great, great year for us.
Speaker 1: But when you talk about traditional media, we really, uh,
Speaker 1: we were having quite a run as a traditional media company.
Speaker 1: When I say we were more cable and free to
Speaker 1: air around the world. Um. I've been here for twelve years,
Speaker 1: and for the first seven years we had a you know,
Speaker 1: an extraordinary run both in the market and grow growth
Speaker 1: around the world and here in the US. Um. But
Speaker 1: I remember a conversation I had with John Malone five
Speaker 1: years ago. Our channels were growing double digit around the
Speaker 1: world in terms of viewership and uh, and our performance
Speaker 1: was strong. Our company had grown, stock had grown from
Speaker 1: about twelve dollars to eighty or eighty five dollars, So
Speaker 1: we really felt like we were in stride. And John
Speaker 1: and I talked about the future and uh. He turned
Speaker 1: to me and he said, Okay, we've grown all of
Speaker 1: our share. Um, how well would we do if people
Speaker 1: could watch anything? And I thought for a moment, and
Speaker 1: I said, Uh, we made a lot of progress in
Speaker 1: the last seven years. We went from five percent of
Speaker 1: viewership in the US to thirteen and I said, I
Speaker 1: think we'd probably be back to five because a lot
Speaker 1: of our content, it's great quality content, but it's second
Speaker 1: choice a lot of it, and our brands aren't strong enough.
Speaker 1: And so it was that day five years ago that
Speaker 1: we began the fight to change ourselves from a traditional
Speaker 1: media company to end a global I P company, and
Speaker 1: we started to change the kind of content that we
Speaker 1: bought produced, and we changed the way we looked at
Speaker 1: our brands. And Uh. That journey got us into sports
Speaker 1: in Europe, where we bought Eurosport two to three sports channels.
Speaker 1: It was one of the reasons we bought the Olympics.
Speaker 1: In each case, the question was not how would this
Speaker 1: do at eight o'clock at night, but as this content
Speaker 1: that people would watch if they could watch anything. And
Speaker 1: in the last year or two it's gotten really a
Speaker 1: more a tougher question, which is will people pay for
Speaker 1: this content before they'll pay for dinner. That's why we
Speaker 1: bought the rights to the PGA Tour. Everywhere in the
Speaker 1: world outside the us. Uh. That's why we bought most
Speaker 1: of the cycling in Europe and most and all the
Speaker 1: majors in Tennis, and that's why we're doubling down and
Speaker 1: continuing to invest aggressively with Oprah and candidly that's why
Speaker 1: we bought Scripts and this has been a great growth here.
Speaker 1: But we were a misunderstood company because when we bought Scripts,
Speaker 1: people thought we bought Scripts to get more linear channels
Speaker 1: and to get synergy. We saw Scripts as an I
Speaker 1: P company that hadn't been really uh, that hadn't been
Speaker 1: taken advantage of globally. So we saw it as food, home, cooking,
Speaker 1: travel and and uh and do it yourself. They owned
Speaker 1: all that content and hadn't been used globally. But but
Speaker 1: not just as a linear play but in the new world,
Speaker 1: when you look at food, when you look at home,
Speaker 1: aren't people going to want to consume content around on
Speaker 1: those genres everywhere in the world on all devices and
Speaker 1: so um, it's been five years and we got a
Speaker 1: long way to go and a lot to learn, but
Speaker 1: we are in We we made a real I think uh,
Speaker 1: we've had some some real acceleration in in changing the
Speaker 1: way our company is seen and saying and the way
Speaker 1: our content is consumed here in the US and around
Speaker 1: the world. And that's why I think Ostagas has has
Speaker 1: really improved. What would you say, what do you think
Speaker 1: was the impetus five years ago? Was it the rise
Speaker 1: of Netflix, the rise of these on demand streaming services. No,
Speaker 1: at the time, it really was the screen on the phone,
Speaker 1: and it was the idea that we were really fighting
Speaker 1: over for the real estate of the TV set. And
Speaker 1: that's why we had such a hell of a business
Speaker 1: we had. You know, we had gone from having four
Speaker 1: to five channels in a hundred and fifty countries to
Speaker 1: ten to twelve channels in over two hundred countries. And
Speaker 1: that was like beach front real estate. So if you
Speaker 1: put the TV set on in Italy and there's fifty channels,
Speaker 1: we have twelve. And you know, that was that concept.
Speaker 1: It existed, you know, everywhere in the world, and we
Speaker 1: were probably the most international media company um and we
Speaker 1: had boots on the ground and so we had a
Speaker 1: great gig. And because we were in a uh, this
Speaker 1: kind of walled garden. If you wanted to consume content,
Speaker 1: there's only fifty channels. It really it encouraged this idea
Speaker 1: of well, we got twelve of the channels, so we
Speaker 1: don't have to make each of them great. We could
Speaker 1: make them pretty good and people will be clicking around,
Speaker 1: they'll run into it. And it was the screen that
Speaker 1: got got John and I on our board saying people
Speaker 1: are starting to consume video content. It's not that far away,
Speaker 1: and in the end, people are gonna be able to
Speaker 1: choose to watch anything they want on this screen. Plus,
Speaker 1: you know, more and more people were moving towards the
Speaker 1: DVR on television, and then you had to be geinnings
Speaker 1: of Netflix, and so there were more choices and there
Speaker 1: was more of ability to choose and to say what
Speaker 1: do I really want to watch right now versus what's
Speaker 1: the best of what's on And so that was kind
Speaker 1: of the beginning of this. Really it was a philosophical change,
Speaker 1: but it changed everything in terms of the way that
Speaker 1: we look at i P and then the way that
Speaker 1: we acquire i P and the kind of assets that
Speaker 1: we would acquire within Discovery. And you clearly have bet
Speaker 1: big in many markets on sports. Eurosport in Europe, I
Speaker 1: know is a huge priority for you. The p G
Speaker 1: A deal. Can you talk a little bit more about
Speaker 1: how the PGA deal came about. Did you approach them,
Speaker 1: did they approach you? You have broad rights to all
Speaker 1: the PGA golf events in markets, if I'm not mistaken,
Speaker 1: everywhere but North America. Everywhere but the US, So we
Speaker 1: have Canada, we have South America. UM Sports came about
Speaker 1: because we just looked at the way people consume content
Speaker 1: and if toward De frances On and you love cycling,
Speaker 1: you have to see it. So it was this question
Speaker 1: and if you couldn't, would you pay for it before
Speaker 1: you pay for dinner? And are we were just guessing,
Speaker 1: but our sense was yes, in the same way they
Speaker 1: are super fans for Oprah and for for Discovery and
Speaker 1: for a crime, that that the super fans around sport
Speaker 1: was going to be a really good bet for us.
Speaker 1: And so that's one of the reasons why we pushed
Speaker 1: aggressively into eurosport. And then we we built a player
Speaker 1: with BAM. We built a direct consumer product over the
Speaker 1: last four years and on there you can get the
Speaker 1: cycling and the tennis and some of the football, with soccer, handball,
Speaker 1: Olympic sports UM and we started we learned a lot.
Speaker 1: In fact, we sat in this conference room made a
Speaker 1: list of the ten things we thought we knew for
Speaker 1: sure about the director consumer business, and eight of them
Speaker 1: were wrong because the way people consume content on a
Speaker 1: phone or on a device is a lot different than
Speaker 1: the way they consume content on a TV. And that's
Speaker 1: what led us to the p g A. The The
Speaker 1: euro Sport Player has been quite successful for us and
Speaker 1: we think we could take it to the next level.
Speaker 1: But it's like a buffet. We we have a group
Speaker 1: of sports and for ten dollars a month you can
Speaker 1: you can get all that stuff. So you're watching the
Speaker 1: French Open, and then the next month you're watching Toward
Speaker 1: de France, and then you're watching the Diving Championships and
Speaker 1: people like it. But the churn was high and we
Speaker 1: started to talk to people about it and they said
Speaker 1: they like the Eurosport Player, but often one of the
Speaker 1: reasons that they churn or leave is that they came
Speaker 1: for the tennis and there was in tennis for another
Speaker 1: three months, where they came for the cycling and the
Speaker 1: cycling season is six months and now they can you know,
Speaker 1: they like the other sports, but they'll they'll subscribe again
Speaker 1: when the cycling starts, and so we found that one
Speaker 1: you need if you if you can have all of
Speaker 1: a sport, it's pretty compelling because it's almost like a
Speaker 1: magazine for people that loved golf or love tennis. They
Speaker 1: want to sume it all the time. They're real super fans,
Speaker 1: and you have to have a lot of it. We
Speaker 1: also saw what Adam Silver did with basketball in baseball
Speaker 1: very successful because you have a hundred hundreds of games,
Speaker 1: and so we looked at golf Um and we said,
Speaker 1: it's every week, there's multiple tours, there's live content all
Speaker 1: the time. It's a very good demo and more than
Speaker 1: half the people on the PGA Tour are from outside
Speaker 1: the US and it's the premier tour everywhere in the world.
Speaker 1: So I approached j um Monahan, who's the commissioner of
Speaker 1: the p g a UM, but he had already been
Speaker 1: studying us because he was looking at how the fact
Speaker 1: that Discovery is the most global company in the world,
Speaker 1: and we have because we have ten channels in every
Speaker 1: country and with the leader in sports in Europe, we
Speaker 1: have an ability to promote to our two consumers products
Speaker 1: that we have and we can create content in fifty
Speaker 1: two languages, and so when I went to see j Um,
Speaker 1: we talked about our ambition to take golf globally and
Speaker 1: Jay talked about why his ambition was. It needs to
Speaker 1: be in every language, It needs to be promoted, and
Speaker 1: the characters need to be promoted on traditional platforms as well.
Speaker 1: You need to let people know about it, You need
Speaker 1: channels to tell people you should sign up for this,
Speaker 1: And so we were really like a perfect match. It
Speaker 1: sounds like the PJ felt like their rights were under
Speaker 1: exploited outside the US, that they really needed to raise
Speaker 1: that profile and they needed to go with a company
Speaker 1: that already had experience going direct to consumer um and
Speaker 1: believed in it um. And for us, you know, we
Speaker 1: were already all in with this idea that you know,
Speaker 1: the p g a globally and we're gonna make some
Speaker 1: announcements in the next couple of weeks. We will add
Speaker 1: to that. We think creating a whole ecosystem around a sport,
Speaker 1: or creating a whole ecosystem about around food or around
Speaker 1: home or around cooking, that's the way to go. And golf,
Speaker 1: I think just gives us a great opportunity to do that.
Speaker 1: And we're also you know, one of the things that
Speaker 1: differentiates us from everyone else is that we own almost
Speaker 1: all of our content everywhere in the world on every platform.
Speaker 1: So most media companies own the US right, so they
Speaker 1: own the linear rights. So if Arizon offers the NFL
Speaker 1: on mobile, they get it from Roger Goodell. They don't
Speaker 1: buy it from from one of the uh the networks
Speaker 1: that own rights that it's not a sub licensing kind
Speaker 1: of thing. And so our philosophy is we're a global
Speaker 1: IP company, and the more great i P that we
Speaker 1: could aggregate globally, it gives us a chance to do
Speaker 1: what Facebook and Apple and Google and Amazon and Netflix
Speaker 1: have done, which has created so much leverage and wealth creation,
Speaker 1: is that they go above the globe. They're able to
Speaker 1: take i P and essentially go everywhere in the world
Speaker 1: and say, if you love this content, it's it's like
Speaker 1: it's up there in a cloud. Anywhere you are in
Speaker 1: the world, you can you can hit your button on
Speaker 1: your phone and you can watch this. It's completely different
Speaker 1: from the way our business started with local franchises, and
Speaker 1: so with the p g A, with the exception of
Speaker 1: the US, were above the globe and with all of
Speaker 1: almost all of our other content, food, home, science, crime.
Speaker 1: Where above the globe philosophically and the above the globe
Speaker 1: allows you to amortize these incredibly expensive rights, whether it's
Speaker 1: for content or sports or is that I mean, that's
Speaker 1: the calculation because the Netflix example is great, but we
Speaker 1: all know Netflix isn't making money. How are you going
Speaker 1: to make these really turn these into businesses. One of
Speaker 1: the things is that we're really in a different business
Speaker 1: than most companies and media because most media is in
Speaker 1: scripted series and scripted movies. So if if our business
Speaker 1: was a soccer field, and it was and I was
Speaker 1: going to my my my son's game when he was young,
Speaker 1: you know, scripted series and scripted movies would be the
Speaker 1: ball and almost everybody would be surrounding that ball and
Speaker 1: fighting over the ball. Where the rest of the field,
Speaker 1: And so, you know, our cost of content is a
Speaker 1: tenth to our average cost of content is four thousand
Speaker 1: an hour. The average cost of content for scripted is
Speaker 1: you know, five, five or ten million. And and they're
Speaker 1: all competing for scripted content, in scripted movies and series
Speaker 1: to build you know, an HBO, a competitive HBO, Showtime, Netflix,
Speaker 1: all of these stars, all these very compelling director. Consumer
Speaker 1: offerings are starting to look very similar their scripted series
Speaker 1: and their scripted movies. But if you're a consumer and
Speaker 1: you want to consume content, if it's scripted series and
Speaker 1: scripted movies, you have ten choices for between ten and
Speaker 1: fifteen dollars. But if you want to consume something else
Speaker 1: that's quality that you love, what's the rest of the stuff.
Speaker 1: And that's what we see. That's our field. So if
Speaker 1: you love science and natural history, you can get that
Speaker 1: from us. If you love Oprah, you can get that
Speaker 1: from us. This is in the long term. If you
Speaker 1: love food or home, if you love golf, if you
Speaker 1: love cycling, and so we see ourselves almost as like
Speaker 1: a magazine rack, whereas you know, the most of the
Speaker 1: rest of the industry, they're kind of Entertainment weekly or
Speaker 1: their Time magazine or the kind of broad platforms that
Speaker 1: give you a little a fair amount of entertainment in
Speaker 1: the scripted area. And and and so we're about quality
Speaker 1: brands that have super fans that we hope we're gonna
Speaker 1: pull us your bonappetite and town and country and like
Speaker 1: Golf Digest, you know, World Open Magazine, and that you know,
Speaker 1: those magazine. Most magazines are gonna go away, and people
Speaker 1: are gonna be having they're going to be consuming content
Speaker 1: and they'll get up in the morning. And you know,
Speaker 1: we think with Golf TV, they'll get up in the
Speaker 1: morning and they'll hit the off TV app, they'll read
Speaker 1: about golf, maybe they'll book a teatime somewhere. They'll they'll
Speaker 1: in the afternoon, they'll pull it down and there'll be
Speaker 1: more articles about what's coming up this weekend, or about
Speaker 1: about which players are hot. Uh, they'll be instructional video
Speaker 1: if you want to work on your putting, and then
Speaker 1: on the weekend you'll be able to choose what tour
Speaker 1: you want to watch and you can watch it on
Speaker 1: your phone or you can watch it on any device.
Speaker 1: And um, So we think the possibilities by owning this
Speaker 1: i P is the compelling possibility is that we can
Speaker 1: now go direct to consumer with this. But we also
Speaker 1: have the optionality that if Apple wanted to go, they're
Speaker 1: already above the globe. They're already in business with five
Speaker 1: million people that they have credit cards and they're selling
Speaker 1: them products. If they want to sell i P two
Speaker 1: people everywhere globally, you know what company could sell them
Speaker 1: content with characters they know, brands they trust, uh and
Speaker 1: and stories that they that they would want to watch,
Speaker 1: you know, in in all these day for an areas
Speaker 1: and you could choose. And so whether it's Apple or
Speaker 1: Facebook or Google um there, you know, or us doing
Speaker 1: regional deals. You know, I was with um with with
Speaker 1: the Hans the other day from Verizon. They have a
Speaker 1: hundred and ten million phones randall. You know, these are
Speaker 1: two great executives between the two. Between the two of them,
Speaker 1: they have two uh million homes I mean devices uh screens,
Speaker 1: And so how do we get our stuff on those screens?
Speaker 1: And so we can do it ourselves or we can
Speaker 1: sell to all the regional players or the global fan companies,
Speaker 1: you know, depending over the next couple of years what
Speaker 1: they feel that they need. But we're starting to see
Speaker 1: now for the first time that a lot of the
Speaker 1: big cable, satellite, and mobile companies, as well as the
Speaker 1: fan companies, are more and more feeling like they maybe
Speaker 1: need some I to either help their platform or decommoditize
Speaker 1: their platform. Are you having those conversations with the Apples
Speaker 1: and the Amazons that do seem such a fit for
Speaker 1: various reasons, with your lifestyle centric channels. We're I mean,
Speaker 1: we're talking to everybody. You know. We'd like to be
Speaker 1: on every Horizon phone in America, T Mobile phone, a
Speaker 1: T and T phone. We'd like to be all across
Speaker 1: Europe on Deutsche Telecom and Voda Phone. We're a little early,
Speaker 1: you know, I think, um philosophically, you know, we've made
Speaker 1: the decision to go I P long, So we do
Speaker 1: we sell very little of our content, uh to other distributors.
Speaker 1: Were holding all of it because we think someday, you know,
Speaker 1: the ability to go sit down with Amazon and do
Speaker 1: a deal around food and cooking in the kitchen with
Speaker 1: Alexa globally. And if we did that and they said
Speaker 1: to us, okay, well, how much of your stuff, your
Speaker 1: recipes and your short form and your long form content,
Speaker 1: can can we get day one, we would say all
Speaker 1: of it. And it's already in you know, X number
Speaker 1: of languages, and so we haven't been selling it. There
Speaker 1: are other media companies and these are this is also
Speaker 1: a good model, which is create the content, hold it
Speaker 1: for your linear platform, and then sell it off everywhere
Speaker 1: in the world. But so we're I P long and
Speaker 1: we think in the long term you know, being an
Speaker 1: I P company will will UH will create a lot
Speaker 1: of shareholder value and also make us a sustainable growth company.
Speaker 1: Because if we're right, then the mobile companies, satellite companies,
Speaker 1: and the fan companies over the next couple of years,
Speaker 1: A're gonna say I need some more good stuff, really
Speaker 1: good content of great stories that people love. And they'll
Speaker 1: look around. They'll say, let's talk to Discovery. They have
Speaker 1: all this great women's content or great lifestyle content or
Speaker 1: great sport content. And and at that point it'll, you know,
Speaker 1: our whole company will look different because our content will
Speaker 1: be we won't be just we won't we won't have
Speaker 1: just a growth company. By putting our content on free
Speaker 1: to air channels and cable companies, our content will be
Speaker 1: on the billions of screens and they'll be they'll be
Speaker 1: pushed by the regional players or the big fan companies
Speaker 1: because they'll want that content in order to UH to
Speaker 1: delight their customers. It sounds like the scenario sketching out
Speaker 1: sounds like the fang companies become a next generation Comcast
Speaker 1: or cable vision that they become Netflix. UM is that
Speaker 1: kind of that is your sense of their ambition in
Speaker 1: the video space is to kind of become those aggregators.
Speaker 1: It's it's it's clear that the platform companies, those that
Speaker 1: are built broadband and phone and cable, um, when they compete,
Speaker 1: they look very much alike, and so more and more
Speaker 1: they're looking to have I P to decommoditize their platform.
Speaker 1: In Europe, a lot of the mobile companies bought the football,
Speaker 1: bought the soccer in order to to differentiate. So if
Speaker 1: you bought BTEE, then you've got all this great football. Um,
Speaker 1: you have T Mobile giving away uh Netflix to customers.
Speaker 1: You have Randall doing a T and T now a
Speaker 1: bunch of free stuff to the best users. So if
Speaker 1: that trend continues, I think we see it on both tracks.
Speaker 1: We see the big platform companies in Europe, Latin America, Asia,
Speaker 1: the US that have invested in building broadband, phone and cable,
Speaker 1: they're gonna need some special stuff for the broadband users
Speaker 1: or the phone or their mobile users and will have
Speaker 1: a full menu to say, you know, in language, what
Speaker 1: do you think would help you? We're open for business.
Speaker 1: And the fan companies are more and more trying to
Speaker 1: get people to spend more time on their platforms or
Speaker 1: to love them and you know, wanted to give me
Speaker 1: hard at times it's hard, you know, right, and and
Speaker 1: and and maybe because of what's going on now, having
Speaker 1: more great characters, great stories, or if you're a super
Speaker 1: fan of science and you can go uh to to
Speaker 1: one of those fan companies and get all kinds of
Speaker 1: great stuff or get all kinds of great stuff on
Speaker 1: food or home that could you know, that could be
Speaker 1: quite appealing. And so we're betting that between the fan
Speaker 1: companies and the regional platform companies that there's going to
Speaker 1: be a market, but we're not. That's not where we're
Speaker 1: putting all of our chips. It's one of the reasons
Speaker 1: we're going ourselves direct to consumer with a lot of
Speaker 1: our businesses. We we have a business called motor Trend
Speaker 1: on Demand where we aggregate all kinds of car content.
Speaker 1: We're with the largest provider of of car content long
Speaker 1: form plus short form, and then we have loads of
Speaker 1: car auctions, and then we own the Motor Trend brand
Speaker 1: and trucker and automobile and we put it all together
Speaker 1: in a direct consumer product. But we're doing it with
Speaker 1: sports in Europe, We're doing it with cars, We're doing
Speaker 1: it with golf, we're doing it. We're gonna do it
Speaker 1: with cycling, We're gonna do it with tennis, and so
Speaker 1: these are all We're not gonna eat for someone to
Speaker 1: put us on their super highway. We're going to start ourselves.
Speaker 1: And in creating those ecosystems that you say around genres
Speaker 1: and around fan bases, it sounds from what you're saying
Speaker 1: that this is really that this is really a streaming world.
Speaker 1: That the linear that the linear TV channels which are
Speaker 1: still so strong and generates so much revenue now that
Speaker 1: those are increasingly not the rear view mirror, but they
Speaker 1: are in your future plans are much more about a
Speaker 1: streaming on demand world than servicing a linear channels. Is
Speaker 1: that fair? Well, we're able to do both now. So
Speaker 1: right now we have our our company is growing with
Speaker 1: our our cable and free to air channels around the world. Um,
Speaker 1: we're making over a billion dollars outside the US, our
Speaker 1: channels are quite profitable. And when you look outside the
Speaker 1: U S subscribers you know, with all the noise, are
Speaker 1: still growing two to three globally, and so people are
Speaker 1: spending less time consuming content on television. You know it,
Speaker 1: There is a secular decline, there's no question about it.
Speaker 1: Subs here in the US have declined, although that seems
Speaker 1: to be ameliorating. And we think with skinny bundles, you know,
Speaker 1: it may it may true up to look more like
Speaker 1: what things look like globally than instead of down three,
Speaker 1: maybe it's down one or even or up one. But
Speaker 1: it's fair to say that we think we have a
Speaker 1: nice sustainable growth business with our traditional channels around the world,
Speaker 1: but we think it's very important to get a relationship
Speaker 1: with the customer either for free advertiser driven or get
Speaker 1: their credit cards for those that love a particular area,
Speaker 1: and we can super serve them, and that that combination
Speaker 1: could be really combustible in a in a way of
Speaker 1: creating huge value. Where we have a traditional business that
Speaker 1: maybe in decline, but our our company itself right now
Speaker 1: has never generated more free cash flow. You know. We
Speaker 1: we have a target of generating three billion dollars in
Speaker 1: free cash flow a year, and so that's off of
Speaker 1: our traditional business, and it's with investing in all this
Speaker 1: i P and it's with investing in in in this
Speaker 1: content so that we own it globally on all platforms,
Speaker 1: and so we think we can do both generate a
Speaker 1: lot of free cash flow off of an existing business,
Speaker 1: even if it declines a little bit over the next
Speaker 1: several years, and then use the i p that we
Speaker 1: have to create a direct relationship with customers in a
Speaker 1: way that no one else can because we're not We
Speaker 1: don't have the same story. We're not saying, hey, here
Speaker 1: we are. We've got great movies and a great scripted series.
Speaker 1: We have a whole different entry point with customers, which is,
Speaker 1: you love golf, we have all of it. You love Oprah,
Speaker 1: you want to spend time with us? Uh. If you
Speaker 1: love science, we have the best science library in the world.
Speaker 1: We're doing it in long form and short form. Tell
Speaker 1: us what you love, will give you more of it.
Speaker 1: So we think we have a different entry point. Does
Speaker 1: it make you nervous that the neat GEO Worldwide Group
Speaker 1: is now joining Disney, the largest media company, the company
Speaker 1: in the world. Disney is a There's no better company
Speaker 1: in the world in terms of building brands. Um Bob
Speaker 1: has done an amazing job and they do have a
Speaker 1: real global sensibility on every you know, uh, in every sense.
Speaker 1: Having said that, in most markets, Animal Planet beats nat
Speaker 1: Gio and Discovery is four or five times the size.
Speaker 1: One of the advantage that Natzio was getting was on
Speaker 1: the Sky platform. Uh, they were getting a big advantage
Speaker 1: in the UK, Germany and Italy because of that connection,
Speaker 1: toy Fox because of the connection, and so they were
Speaker 1: being uh meaningfully supercharged. So you know, that may continue
Speaker 1: or that may that may that may be an opportunity
Speaker 1: for us now that Comcast is about to take over Sky.
Speaker 1: Right having said that, I think Disney is a great competitor,
Speaker 1: and um, we'll have to get a little better. The
Speaker 1: good news is between Animal Planet, Science and Discovery, um,
Speaker 1: when much broader distributed in many markets, we have two
Speaker 1: to three channels, natural history channels on analog and they're
Speaker 1: on digital. So when you really look at nat at
Speaker 1: Nazio versus the Discovery natural History channels and Discovery itself,
Speaker 1: Nazio is at least today much smaller. Let's talk about
Speaker 1: let's talk in more detail about the Scripts deal. I'd
Speaker 1: love to unpack a little bit. I know that that
Speaker 1: you and Scripts had kind of flirted on and off
Speaker 1: for a couple of years. What was it that made
Speaker 1: what was it that made the transaction happened? This time
Speaker 1: around what what was the who who made the first
Speaker 1: phone call? What was the spark that really led to
Speaker 1: that led to your deal? Um, we were we we
Speaker 1: We had made three other attempts at scripts UM and
Speaker 1: the family wasn't ready to sell, so that those times
Speaker 1: they said, sometimes sometimes it was after a significant, a
Speaker 1: meaningful period of time of discussion, and sometimes it was
Speaker 1: pretty abrupt. You know, we're just not ready. I think
Speaker 1: the decline in the marketplace probably had an impact on
Speaker 1: the family, the fact that they hadn't UM broadened out internationally.
Speaker 1: You know, we saw, for instance, in Latin America. UH
Speaker 1: we have twelve channels in each country, and we have
Speaker 1: a channel called Home and Health. It's the number one
Speaker 1: channel for women in UH in Latin America on cable,
Speaker 1: and we launched that about nine years ago. It's it's
Speaker 1: effectively like h G TV, Food and Health put together. UM.
Speaker 1: They hadn't gone down their scripts and so about a
Speaker 1: year ago, a year before we did our transaction, they
Speaker 1: decided they wanted to try and launch some channels in
Speaker 1: Latin America, but well, it was left was digital tears
Speaker 1: that you had to buy through, and so I think
Speaker 1: they recognized that they had built a fantastic business in
Speaker 1: the US with great brands and a great leadership team.
Speaker 1: Ken did an extraordinary job with that company and really
Speaker 1: understood storytelling and brand and had to nourish an audience.
Speaker 1: But they hadn't invested outside the U S, outside of
Speaker 1: Poland where they bought a business, and so I think
Speaker 1: when when Ken looked at the business, he said, a
Speaker 1: lot of the growth is going to be outside the
Speaker 1: U S. We're way late now, um, and I'm not
Speaker 1: sure we're big enough. And so between Ken and the family, uh,
Speaker 1: they pretty quickly came to the conclusion that they were
Speaker 1: really serious this time, and it became it became about,
Speaker 1: you know, a real uh. We thought we were in
Speaker 1: there ourselves over price or it was a very competitive auction.
Speaker 1: We thought originally we were in there ourselves, and then
Speaker 1: we got the feeling maybe somebody else's is in there
Speaker 1: with us. And then it turns out that Viacom thought
Speaker 1: they were in by themselves, and then they found out that,
Speaker 1: you know what, maybe there's somebody maybe there's somebody in
Speaker 1: the house with us. And it took us a while
Speaker 1: until we saw each other, but we were both there
Speaker 1: in the spill Tennessee Airport figuratively UM and it it
Speaker 1: it ended up being you know, a competitive a competitive bid. UM.
Speaker 1: We did feel at the end that this was quite
Speaker 1: an important transaction for us because we felt that we
Speaker 1: could really supercharge all their i P around the globe,
Speaker 1: launch new channels, put their content on our platforms around
Speaker 1: the world with almost no cost because we already have
Speaker 1: all these channels, so we could actually save money from
Speaker 1: buying content and put their content on UM. We looked
Speaker 1: at their i P and we thought this was really
Speaker 1: right along our strategy because they owned all the content
Speaker 1: and they hadn't hadn't really deployed it or or encumbered it.
Speaker 1: So we looked at food and we thought, between food
Speaker 1: and cooking that we could really make something, you know,
Speaker 1: in the long term outside of channel of the channel business,
Speaker 1: we can do something that people you know, would would
Speaker 1: really care about and spend time with. I mean, when
Speaker 1: we looked at food, we actually thought to ourselves, UM,
Speaker 1: that food is the one area where every person in
Speaker 1: every language, everywhere in the world asked the same question
Speaker 1: every day, what's fit dinner? And not everybody asks what's
Speaker 1: what time is the p G A on today? Not
Speaker 1: everybody asks, you know, for for seeing science content or
Speaker 1: space content. Not everybody wants to see crime content when
Speaker 1: they get up every day, but everybody asks about food.
Speaker 1: And so we saw their I P the food, the
Speaker 1: cooking category, the home category, all those is fitting so
Speaker 1: great with ours. It made us bigger, uh, And there
Speaker 1: was We thought that'd be a lot of synergy there
Speaker 1: because we do the same things. I. I started out
Speaker 1: being a business development guy at at NBC and we
Speaker 1: did a lot of transactions and in the end we
Speaker 1: did a lot of big transactions. But like when we
Speaker 1: did the Universal deal, we weren't in the movie business.
Speaker 1: That was a whole different business. We weren't in the
Speaker 1: theme park business, but they had cable channels and NBC
Speaker 1: was in the cable channel business. And so there wasn't
Speaker 1: a lot of synergy because there was in in the
Speaker 1: theme park or or or movie business because we weren't
Speaker 1: in it. Whereas here we looked at scripts and we said,
Speaker 1: this is exactly what we do, and we think we
Speaker 1: have a lot of the quality brands in cable. They
Speaker 1: have a lot of the quality brands in cable and
Speaker 1: today and together we have almost all of the quality
Speaker 1: lifestyle brands and cable um and between h G Food,
Speaker 1: I D, t LC and Own, we had five of
Speaker 1: the top six channels or seven channels for women. And
Speaker 1: when we when we put it on the back of
Speaker 1: an envelope, we said, wow, you know we we could
Speaker 1: be the number one or two player in America on
Speaker 1: television and reaching women. And so we were convinced that
Speaker 1: this was a transaction that could have really long term
Speaker 1: value for us. But the street and the narrative around
Speaker 1: the transaction uh as when we closed it, which surprised us,
Speaker 1: was two linear TV companies coming together. It was there
Speaker 1: was a little underwhelming response that was there was a
Speaker 1: positive narrative, but it was there was a there was
Speaker 1: a more there was a more overwhelming negative narrative, which
Speaker 1: is two companies that aren't big enough that are going
Speaker 1: to come together and they'll uh and they'll they're both
Speaker 1: linear TV companies and together they won't be there'll be
Speaker 1: a little stronger, but they won't be strong enough. Are
Speaker 1: The way we saw it was where an I P company,
Speaker 1: We're buying this great i P that's not deployed globally,
Speaker 1: and we could put it to build our near term
Speaker 1: linear business, but we could also have it build our
Speaker 1: I P future. And a lot of this year was
Speaker 1: about really changing that narrative, showing that we're more than
Speaker 1: just UH our twelve cable channels coming together with their
Speaker 1: six that together where we reach more people, that we
Speaker 1: that we have an ability to promote between our channels,
Speaker 1: which can give us real which is unique and give
Speaker 1: us real growth, and that we could take their content
Speaker 1: around the world and that ultimately they add to UH
Speaker 1: to our menu of global I P and what we
Speaker 1: can offer directly or through regional or or FANG type
Speaker 1: companies when people want to consume content on a device.
Speaker 1: I know you this year, as you said, has been
Speaker 1: a lot about integration and getting the right management. What
Speaker 1: of what you've seen so far programming initiatives, branding initiative,
Speaker 1: advertising initiatives, what has what would you say is like
Speaker 1: the most exciting UM development that that you can see
Speaker 1: of the two brands coming together on the traditional side,
Speaker 1: I would say that on on any given night, UM,
Speaker 1: when when you when you tell we have we have
Speaker 1: three or four the top five channels for women, and
Speaker 1: when you put together the rating of our top five
Speaker 1: channels for women, we aggregate somewhere between a four and
Speaker 1: a seven and over a seven rating for women, and
Speaker 1: where advertisers used to have to gobble together a lot
Speaker 1: of different purchases with a load of different cable companies,
Speaker 1: we can offer on any given night, Yet broadcasters in
Speaker 1: most cases getting a one rating or a one five
Speaker 1: or maybe a two rating in the women's demo, and
Speaker 1: on any given night we're we're getting a three, four
Speaker 1: or five or six rating. And so one big reveal
Speaker 1: was that that we have a very big female audience
Speaker 1: that's really engaged and that watches us alive, and that
Speaker 1: that's very powerful for advertisers. The second is that, um,
Speaker 1: we used to spend a lot of money telling people
Speaker 1: about our shows, but we couldn't tell them. We could
Speaker 1: tell them what channel it's on, but we couldn't tell
Speaker 1: them the day and the date. But now that we
Speaker 1: own all these channels, if we have something great coming
Speaker 1: up on TLC on Sunday night at eight o'clock Fiance,
Speaker 1: we could at at seven forty five and at seven
Speaker 1: fifty nine run a promotion that t LC at eight
Speaker 1: o'clock tonight on h G Food, I d Own Travel,
Speaker 1: Animal Planet, We and and we built a very strong,
Speaker 1: UH aggregating marketing vehicle that is distinguished because we can
Speaker 1: do day and date, and we could also do it
Speaker 1: in a way where we made the decision early that
Speaker 1: we think if someone's watching I D in there and
Speaker 1: and it's it's a minute to eight, if they don't
Speaker 1: like what they're watching, they're gonna click and find something else.
Speaker 1: So we have no problem telling people on I D
Speaker 1: there's something great coming up on h G t V
Speaker 1: and it's or there's something great coming up on the
Speaker 1: Food Network, a new episode of Diners and Dives, you know,
Speaker 1: with Guy Fieri, And it's one of the things that
Speaker 1: last quarter, our we actually grew at percent when the
Speaker 1: rest of the industry was down nine or ten. And
Speaker 1: we think part of that is that we were able
Speaker 1: to promote much more efficiently. Our reach grew by with
Speaker 1: this transaction. And you know, also we think we got
Speaker 1: lucky because we don't own any broad entertainment channels, and
Speaker 1: broad entertainment channels today are much harder because if you
Speaker 1: want to see a great scripted series, you're gonna go
Speaker 1: to f X or t N T or TBS or USA,
Speaker 1: maybe because they're really good channels, but you could also
Speaker 1: got so many places to watch a great scripted series,
Speaker 1: and we have We don't have any of that kind
Speaker 1: of stuff, you know, except for we own which Is
Speaker 1: which is, you know, a great service for African and
Speaker 1: mostly African American women. But our channels are about affinity
Speaker 1: groups that love food, I love crime, I love home,
Speaker 1: will love uh natural history. And so I think part
Speaker 1: of the industry moved in odd direction. Um, we're doing.
Speaker 1: We're doing pretty well. My last question for you, David,
Speaker 1: thank you so much for for your time today. Um,
Speaker 1: everybody in media is talking about the M and a marketplace.
Speaker 1: Do you see is Discovery? A buyer is Discovery? A
Speaker 1: seller is Discovery? A status quo for now company? Well,
Speaker 1: I love, I love Discovery. UM. I came here to
Speaker 1: have an impact, and I uh, you know, on a
Speaker 1: personal level, you know, I'd love to be here for
Speaker 1: the long term. And we're building the company so that,
Speaker 1: you know, we have an opportunity to have real sustainable growth.
Speaker 1: And since we're doing we're in the nonfiction and sports area,
Speaker 1: we think from a scale perspective, we have a real chance. Um,
Speaker 1: but we're a public company and there is a lot
Speaker 1: of trans actions there are a lot of people. You
Speaker 1: see seventeen times Comcast was willing to pay for Sky.
Speaker 1: We have a much bigger, bigger content business across Europe.
Speaker 1: UH Disney was very clear about wanting to get bigger
Speaker 1: internationally between the sports and our international business. We know
Speaker 1: we have a lot of attractive assets. What we have
Speaker 1: going for us in terms of sustainable growth is our
Speaker 1: company is really turning into a free cash flow machine,
Speaker 1: a lot of it having to do with Scripts and
Speaker 1: US coming together. We have a target of three billion
Speaker 1: a year of free cash flow, and if we reach
Speaker 1: that then over the next four years we'll be generating
Speaker 1: about four billion dollars in cash and that will give
Speaker 1: us the optionality of either investing in the growth businesses
Speaker 1: that we have, whether it's direct consumer or more traditional,
Speaker 1: of buying back our stock, of doing our own transaction
Speaker 1: buying some assets so that that where that scale will
Speaker 1: help us ashore sustainable long term growth um or be
Speaker 1: in a position where we're we're attractive if we need
Speaker 1: to be given our set of assets over the next
Speaker 1: couple of years to UH to be part of somebody
Speaker 1: else's big company. Free cash flow just might be catinet
Speaker 1: for some companies in the hunt for earnings so well,
Speaker 1: we will stay tuned. David, as always great to talk
Speaker 1: with you. Thank you so much for your time, Thank you,
Speaker 1: thanks for listening. Be sure to join us next week
Speaker 1: for another episode of Strictly Business. Yeah,