Despite High Costs, Discovery 3D on Track for Q1 Start

Despite interest from distributors in the U.S. and around the world, 3D’s future “is hard to tell,” David Zaslav, CEO of Discovery Communications, said at the UBS conference in New York Monday. “It’s very expensive,” he said, adding that Discovery chose to work with Sony and Imax to minimize the costs of developing a 3D channel and to share information along the learning curve.

"We need to learn about 3D, what works and what doesn’t and how people consume it,” Zaslav said, calling “3D is an experiment.” Discovery is on track to launch its round-the-clock 3D channel in the first quarter, and 3D remains “important for us,” Zaslav said. He cited Discovery chairman John Hendricks’ view when he founded the network that “content looks better when it’s closer to real” and said the company has to invest in how content “looks on a set.” He said company executives, who have been traveling the world to extend the network’s reach, are hearing more requests for 3D from international distributors. As the first network to have an HD channel, he said, it’s important for Discovery “to be at the forefront of how we present our content.”

Zaslav said the company’s efforts two and a half years ago to deploy HD around the world have resulted in channels with “HD carriage or commitments for carriage” in 60 countries. He noted that in some emerging TV markets, including Russia and Turkey, there are only 500,000 or so HD subscribers. As the market grows, he said, “We will have a meaningful place on that tier."

Regarding the recent social phenomenon of “cord-cutters” -- multichannel homes that drop pay TV subscriptions and keep their broadband connections to watch television -- Zaslav cited the results of an ESPN study released Monday reporting that only 0.11 percent of TV viewers over the past three months dropped multichannel TV service and kept broadband Internet connections, according to a Nielsen national people meter sample. “Are you looking at something or nothing?” he said. Acknowledging “it’s hard to know” about the prevalence of cord-cutting, he said, “Cable is foundationally very strong.” He said media buyers are “leaning in” to cable domestically and abroad. But he acknowledged that “the domestic market has slowed.”

Discovery will have to figure out ways to build new channels with a voice that can resonate with people, Zaslav said. He said if cord-cutting is indeed occurring and people are spending time on other platforms, “that’s an opportunity for us” dependent on logistics and economics. Discovery’s content “needs to be on all platforms, so we can grow market share and be relevant to people of all ages,” he said.

Zaslav said the industry “seems to be aggregating around the idea” of TV Everywhere, and he hopes “it happens sooner.” TV Everywhere is a “rational way” for the cable industry and programmers to get “another bite at the apple,” he said of the Time Warner- and Comcast-based service. Current deals provide that viewers have a right to Discovery’s 13 channels in the U.S. through the TV with no provision for moving content to another platform, Zaslav said. If programming could be on a platform that’s measured in way like TV audiences are, so programmers know that, say, 1.5 million viewers watched a show on first airing and 500,000 saw it a week later on a DVR, that’s a workable model, he said. “If a year from now we find that another 250,000 people watched it online -- with the ads and Nielsen measures it and we can monetize that -- that’s a plus to us,” he said. If TV Everywhere succeeds, it will be “good for us,” Zaslav said, if the audience is measured and gives cable operators a “stickier platform.” If the option to view online or on TV makes customers happier with their cable providers, “that’s a goody for them,” Zaslav said. “And that means there should be some kind of economic goody for us.”