Discovery is banking on its €1.3bn deal to screen the Olympic Games as one of the main ways to propel subscriber numbers for its new streaming service, as the US television group bets that live sport will allow it to take on rivals offerings from Disney, Apple and Netflix.
The new online service Discovery Plus will launch in the US and several European countries including Italy and the Netherlands on Monday, seeking to follow viewers who are turning away from network television in favour of internet platforms.
The launch takes place in the lead-up to the Tokyo games, postponed because of the pandemic and scheduled to begin in July 2021. Eurosport, the Discovery-owned sports network, has paid €1.3bn for exclusive rights to broadcast the world’s biggest sporting event across Europe until 2024.
Andrew Georgiou, president of Eurosport, said Discovery Plus will be the only place where viewers are guaranteed to get full access to every minute of the Olympics live in many European countries.
“The Olympics is one of the broadest opportunities to bring on a really large cohort of people on to Discovery Plus . . . people that will want to see and stay on with us beyond the Olympics,” he said.
But the strategy is a risky divergence from how online streaming services have developed to date. Netflix, Disney and Apple have so far refused to join traditional TV networks in bidding for sports rights.
Amazon has been the most willing to enter the fray, acquiring the rights to screen some matches from the National Football League in the US and English Premier League in the UK in an effort to tie sports fans to its Prime delivery and video services.
However, even a giant such as Amazon has so far avoided contracts worth hundreds of millions of dollars — the types of fees that pay-TV groups such as Fox in the US and Sky in Europe have regularly paid for elite sporting events over the past decade.
Online sports network DAZN, owned by billionaire Leonard Blavatnik, has paid huge sums to screen big boxing bouts and European football matches, but is also yet to turn a profit.
Mr Georgiou said that Discovery’s aim is to rebuild the “bundle” of offering sport alongside entertainment programming for younger, online audiences.
He said the Olympics has broad appeal which should result in new subscribers for Discovery Plus, believing the company can also retain them with programmes made by its other entertainment networks such as TLC, Animal Planet and the Oprah Winfrey Network.
However François Godard, analyst at Enders Analysis, cast doubts over whether the strategy would work because the Games only take place every two years and sports fans will prefer to spend on services that show more regular events.
“The Olympics may be an opportunity to raise the profile of [Discovery Plus],” said Mr Godard. “But they will need distribution deals with major pay-TV operators and telcos for sustained subscriber growth.”
The terms of Eurosport’s Olympics deal, which began in 2018, also differ by country, as many nations have broadcasting rules that dictate the Games must also be shown by free-to-air channels.
Mr Georgiou said Eurosport is in talks to acquire the rights to screen sports that would only appear exclusively on Discovery Plus, seeking an event that can replicate what The Mandalorian, a Star Wars-inspired TV series, has done to attract subscribers to Disney Plus.
Though it is unlikely to be bidding for the most valuable deals, which in Europe tend to be for leading football tournaments, Discovery will seek long-term agreements that can expand its coverage of tennis, cycling and winter sports. In December Eurosport signed a deal to screen US PGA golf tournaments.
“Something that we’re really excited about is to go and invest in new content,” said Mr Georgiou. “Content which we wouldn't have otherwise potentially invested in for Eurosport, which will become Discovery Plus first or exclusive.”
However Discovery expects to lose between $200m and $300m more on its streaming business next year than it has this year as it invests in content, marketing and technology to roll out the new service.
The company behind cable channels such as the Food Network and HGTV reported net income of $300m on $2.6bn in revenue in the three months to September. Discovery shares were hit hard by the pandemic but have pared the worst losses, leaving the stock down about 10 per cent on the year.
At a launch event in December the company did not guide on how many subscribers it expects to sign up to Discovery Plus, leading to a cautious response from investors.
Michael Nathanson, analyst at MoffettNathanson, questioned whether the service, priced at $5 a month, can be a “big enough lifeboat” for the company as it grapples with a declining traditional television market.
“Within the media sector, there is Disney and then there is everyone else,” said Mr Nathanson. However he added that Discovery Plus has better prospects beyond the crowded US market. Outside the US and India, “there is currently Netflix and no clear No 2 player”, he said.
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