In A Subtle Shift, Discovery CEO Says OWN Will Be Profitable This Year
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Up to now the company promised that its joint venture network with Oprah Winfrey would break even on a cash flow basis in the second half of 2013. But CEO David Zaslav slightly raised the stakes this morning, promising those attending Sanford C. Bernstein’s Strategic Decisions Conference that “we’ll be making money on OWN.” The channel — which stumbled out of the gate in 2011 — is “ahead of where we thought it would be” and “finding enormous success for us.” For example, on Saturday night, when it runs original programming without Winfrey, “we’re the No. 1 network for African American women.” The comment buttressed Zaslav’s broader argument that the pay TV business is in good shape, and Discovery is doing especially well in that environment. Zaslav is unfazed by the seemingly growing number of consumers who say that they’re fed up with rising pay TV rates, and want distributors to offer channels a la carte or on low-priced tiers. “This is a very sturdy system,” he says. “Viewers really enjoy the basic package…I don’t see that being challenged.”
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That belief will drive Discovery as it prepares to fight for higher fees in its next rounds of carriage negotiations with pay TV providers. “We feel we need to get more value” for the company’s rising ratings, and outlays for programming, Zaslav said. “We’re on the right side of the argument emotionally and on the right side of the argument in terms of the statistics.” He’s also optimistic about the ad environment as TV networks prepare to cut billions of dollars of deals in the annual upfront market. Demand “remains very strong…right now, it feels quite good.” Zaslav is especially bullish about the opportunities for Discovery overseas, especially after it cut deals last year that bolstered its presence in Scandinavia and elsewhere in Europe.
Despite his rosy views about pay TV, he’s slightly hedging his bet by investing in Internet video enterprises including Revision3. “For the near term you’re going to see the content business strong or stronger than it’s ever been,” Zaslav says. “But we have to pay attention to what’s going on in the world.” Although Web video “isn’t what we do for a living,” he adds that “we’re saying, let’s play around in this new space and make sure our brands are in front” of online audiences. “We’re trying to figure out how these two worlds can coexist.” Since Discovery owns almost all of its content — unlike many of its rivals — “we’ll do well in any environment.”