Discovery Joins Streaming-Video Crowd With Reality-TV Focus
The logo of Discovery Communications Inc. is seen on the exhibit floor in Washington, U.S. (Photographer: Andrew Harrer/Bloomberg)

Discovery Joins Streaming-Video Crowd With Reality-TV Focus

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Discovery Inc., the owner of cable channels such as HGTV, TLC and Animal Planet, is launching a new streaming service, betting that unscripted shows about romance, food and home improvement will stand out in a crowded market.

The new service, called Discovery+, will launch Jan. 4, the company said Wednesday. A subscription with advertising will cost $4.99 a month in the U.S., while an ad-free version will be priced at $6.99.

Discovery Joins Streaming-Video Crowd With Reality-TV Focus

Discovery+ is the company’s biggest bet yet that it can make money from the growing legions of cord-cutters who don’t subscribe to cable TV, following the introduction of niche offerings featuring golf, cycling and cooking.

Discovery shares rose as much as 5.6% to $29.22 in New York trading Wednesday, after CNBC reported on the coming launch. The stock is down 15% this year.

The service could attract subscribers quickly, thanks to a deal giving Verizon Communications Inc. customers free access for up to one year. The agreement is similar to one that Walt Disney Co. struck with Verizon to boost subscribers to Disney+. In February, Disney said about 20% of that streaming service’s customers -- or about 5.3 million -- came from Verizon in the first two months.

Discovery+ will feature thousands of episodes from its portfolio, which also includes the Food Network and the namesake Discovery Channel. The service will have new shows from Magnolia Network stars Chip and Joanna Gaines, who are famous for the HGTV series “Fixer Upper”; spinoffs from TLC’s popular “90 Day Fiancé” franchise; and nature shows from the BBC. Discovery has also licensed programming from A+E Networks, home of the History, Lifetime and A&E channels.

A Latecomer

Discovery is arriving late to the streaming market, behind Disney+, Comcast Corp.’s Peacock and AT&T Inc.’s HBO Max -- all of which are competing with more-established services from Netflix Inc. and Amazon.com Inc.

A large library of unscripted shows will distinguish Discovery’s programming from other platforms, which are focused more on scripted dramas, the company’s executives say.

“Maybe scripted series are really sexy but what people really watch is our stuff,” Chief Executive Officer David Zaslav said at an investor briefing. He said Discovery+ will be a “really great companion” to popular streaming services like Netflix and Disney+.

Discovery’s nonfiction lineup was bolstered by its 2017 purchase of Scripps Networks Interactive Inc., which added HGTV and the Food Network to its portfolio. The reality focus also has paid off during the pandemic, allowing Discovery to continue filming some cooking shows, while scripted dramas produced by other media companies were forced to pause.

Discovery Joins Streaming-Video Crowd With Reality-TV Focus

Discovery also plans to take advantage of its large international business. Discovery+ will be available in about 25 countries by the end of next year and will stream the Olympics to subscribers in Europe, where the company has the broadcast rights.

Discovery executives declined to reveal subscriber goals or when they estimate the service will become profitable. The company expects to lose an additional $200 million to $300 million on its streaming services next year through more investments, said Chief Financial Officer Gunnar Wiedenfels, who called 2021 a “peak investment year.”

Discovery has 5.2 million subscriber for its streaming services, mostly from Discovery+ subscribers who have already signed up in Britain and India.

Media companies are under pressure to put their shows online because the traditional cable-TV business is in decline. The research firm Kagan predicts there will be 59 million U.S. subscribers by 2022, down from almost 83 million last year. The retreat is shrinking both the distribution fees that network owners get from pay-TV providers and the audiences that drive ad sales.

Keeping Peace

Like its peers, Discovery has to proceed cautiously in streaming, making its shows available online without upsetting cable companies like Comcast that pay for the rights to their channels. To avoid this, current seasons of most Discovery shows will remain exclusive to cable-TV subscribers and then be available on Discovery+ after the season ends.

The initial Discovery+ advertisers include Kraft Heinz Co., Lowe’s Cos. and Toyota Motor Corp. Like Comcast’s Peacock, Discovery+ aims to limit commercials to less than five minutes an hour -- far less than traditional television.

Though consumers have grown accustomed to streaming ad-free on Netflix, there are some signs that people will embrace services with commercials. Peacock, which is free, has grown quickly since it launched nationwide in July, signing up nearly 22 million people.

Discovery expects its new streaming service to be available on all major platforms when it launches and is in active negotiations with the two largest connected-TV platforms, Roku and Amazon Fire TV.

©2020 Bloomberg L.P.

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