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Andrew Warren, Senior EVP and CFO, Discovery Communications, has described the broadcaster’s international business as a “real differentiator” and suggested that newly-acquired Eurosport will benefit from a more localised approach in the 54 markets that Discovery operates in.
Interviewed by CFO Magazine, Warren noted that the company’s international networks grew 51 per cent last year, compared with seven per cent domestically. In addition, 45 per cent of Discovery’s revenues came from its international networks, with the majority soon expected to come from overseas.
He described pay-TV as an “enviable” industry for several reasons. “One, it’s a dual-revenue-stream business: you get subscription fees from distributors and advertising dollars from advertisers. Around the globe, we’re 50 per cent sub-fee-driven and 50 per cent ad-sales-driven.”
A second reason he gave was the barriers to entry. “Pay-TV is an industry that is hard to penetrate unless you have an established brand, an established infrastructure, and ‘shelf space on cable, telco, and satellite systems. Another reason is that pay-TV is still growing. The US is largely fully penetrated, but in many of our big global markets there’s a huge amount of organic pay-TV growth. In Brazil, 34 per cent of households subscribe to pay-TV. In Italy it’s 35 per cent, Australia 30 per cent. These are all tremendous opportunities for us, and we have anywhere from six to twelve channels in those markets.” He acknowledged that the US was a healthy market for Discovery. “We have 12 per cent audience share of the pay-TV universe. But the real differentiator for us is our international business,” he admitted.
Discussing the rationale behind the Eurosport acquisition, deal, Warren said that Eurosport was a top-10 channel for men in 54 countries. “We’re in those same countries with top-10 channels for men like Discovery and Animal Planet, so the synergies are dynamic and real. The second rationale is that TF1, which had owned Eurosport for many years and is now a minority joint-venture partner of ours, managed it as a pan-European service. They didn’t have local ad sales, and they didn’t have content specifically driven toward particular markets. Because we have offices, salespeople, content people, and distribution expertise in those 54 markets, we’re going to take a much more localised approach to that content,” he advised.