Pre-MIPTV interview series: JB Perrette, Discovery Networks International

JB Perrette

With its international business now accounting for over half of factual giant Discovery’s overall business, Discovery Networks International president JB Perrette talked to Stuart Thomson about plans for Eurosport, the free-to-air and pay TV markets, investing in production, and digital initiatives. 

Among global channel providers, Discovery has perhaps gone furthest over the last few years in expanding its business outside the US market, to the point where its international business now accounts for the greater proportion of revenue. Not only has the group expanded the range and distribution of its portfolio of organically developed channels, it has made major international acquisitions over the last three years in the shape of Eurosport, previously owned by France’s TF1, and the Nordic SBS-branded channels formerly owned by ProSiebenSat.1. Discovery’s channels reached a record 654 million viewers globally at the end of last year. 

Eurosport, majority owned by Discovery for the last nine months, is crucial to the broadcaster’s European plans. Discovery recently appointed former MP & Silva Group co-CEO Peter Hutton to run the sports network. The broadcaster is now moving to invest heavily in sports rights, including high-end premium rights where appropriate, and using the sports network’s second channel, Eurosport 2, as its vehicle for localisation.

“Strategically we are on the path to move from having the single pan-regional strategy that’s been in place for 25 years to a dual-pronged pan-regional and local strategy,” says JB Perrette, who has served as Discovery Networks International’s president for the last year. “We see this as a marathon, not a sprint.” He cites the example of Sweden, where Eurosport 2 carries local ice-hockey and handball, and France, Eurosport’s home ground, where the channel holds second league rugby rights. Eurosport has also invested in MotoGP rights for Germany and the Benelux, among other investments.

Rights portfolio

Perrette says Discovery’s aim is “a strengthening of our rights portfolio in terms of each of the markets where we want to localise, while staying financially disciplined about what makes sense”. However, he says that localisation is not just restricted to acquiring specific sports properties but extends to “making the channel feel more local not just in terms of rights but in production, promotional activity and marketing…to promote events and drive viewership”.

Perrette is realistic about the financial realities of competing with incumbent pay TV platforms for very high-end premium properties such as national top-tier football rights. However, he points out that Discovery has the ability to make money from rights across multiple rather than single, national markets and also argues that there may be room to complement pay TV platform operators in certain cases. “What we can do with rights holders is very different from a single market approach. We can also see that these guys are running businesses and there is a question of how many rights can you swallow at once,” he says. As Discovery is on big basic packages, it could complement premium operator-owned sports channels by airing coverage of early rounds of premium competitions or the competitions of lower-tier leagues, allowing pay operators to defray some of the ever-growing costs of maintaining large portfolios of sports rights. In addition, Eurosport can continue to air coverage of sports that don’t have the same pulling power as football, but nevertheless remain popular.

If Eurosport is aligned with its traditional focus on pay TV, Discovery’s other principal European acquisition of the last three years – of the former SBS Nordic channels previously owned by ProSiebenSat.1 – is indicative of the attention it is now paying to the potential of a dual-revenue strategy including both pay TV carriage deals and advertising-supported free-to-air channels. Discovery has also dipped into the free-to-air business in Germany, Italy, the UK and Spain. “The leadership team looked at some of the markets where pay TV was struggling or had capped out and innovated, in a creative way, to launch some free to air networks around Europe. That strategy has been a key part of what has – in a fairly moribund macro-economic environment – enabled us to grow at a double-digit rate,” says Perrette. “We love the hybrid pay and free-to-air model and it has worked very well – exploiting pay TV rights and then taking [that content] to free-to-air.”

He says Discovery could now take the same model into sports, and adds that the broadcaster will look at possible further free-to-air channel launches in markets where digital-terrestrial platforms provide opportunities.

Production interests

In addition to acquiring channels, Discovery has also extended its production interests – a journey that began with the 2011 acquisition of UK independent production company Betty – most recently teaming up with international cable operator Liberty Global to take control of global production outfit All3Media. (The pair also recently joined forces again to invest in all-electric motorsports franchise Formula E, indicative of the close relationship between two companies that share a common shareholder in the form of US cable mogul John Malone). Describing Liberty Global as a “terrific partner”, Perrette says the pair had a shared interest in acquiring more intellectual property, not only in entertainment but in sports as well.

Perrette says that Discovery’s approach is to be “opportunistic where it makes sense” within the framework of “a strategic rationale”. Of the acquisition of Betty, the joint acquisition of All3Media and the joint investment in Formula E, he says that “in all three of those deals, we felt there was great creative talent and great intellectual property.”

Even before investing directly in production assets, Discovery had, says Perrette, looked to own the rights to the content it airs. “Without owning production companies, for 30 years we have owned the vast majority of our content. Our philosophy is that owning strong IP is critical for us as a company, and that will continue whether we own the production company or not,” he says. “That will be at the heart of what we do. We will look at studios where it makes sense. We want to own more IP but…we are open to a variety of ways to do it.”

Perrette is more sceptical about the value of taking a deeper plunge into the fashionable world of multichannel networks. In fact, he points out that Discovery was one of the first big media companies to invest in what are now called MCNs – in its case by acquiring San Francisco-based Revision 3 in 2012. However, he emphasises that Discovery’s approach with Revision 3 was different than what he sees as the more typical MCN model. In that case, he says, Discovery took a company that effectively rented rather than owned its content and turned it into a company that “owns most of its streams”.

“What we believed was that the pure MCN model where you aggregate rented IP is a very difficult business model. There is a lot of interest but the business model seems very unclear to us,” says Perrette. “The [MCN] model is evolving but it isn’t a great business yet.”

Discovery will continue to evolve the mix of content on its own networks to cater for audiences that it hasn’t yet fully served. One area Perrette highlights is the development of crime and mystery fiction content to support its true crime-based ID channel. Another is more male-focused content for Turbo, the international variant of the US Velocity channel. However, in general, he says, Discovery will focus on developing a mix of channels with broad international appeal that is complemented by a range of channels with a more local focus, as in Latin America where it operates the number one kids channel in that market – something that has not been replicated elsewhere.

Overall, Perrette says he believes the pay TV model has staying power, and that OTT will exist alongside, rather than cannibalise, the existing model: “Consumers do not want to subscribe to 10 different services. Brands that curate content will become even more important.”