Discovery Inc.: Shifting From Linear to Platform Business through Direct-to-Consumer Strategy
| Case Code: BSTR649
Case Length: 19 Pages
Pub Date: 2023
Teaching Note: Not Available
Organization : Warner Bros. Discovery
Industry : Media
Countries : United States
Themes: Growth Strategy, International Business, Brand Strategy,Platform Model
Abstract Case Intro 1 Case Intro 2 Excerpts
The Transition From Cable Tv To OTT Content
In January 2007, Zaslav, a former executive at NBC Universal, was appointed President and CEO of Discovery. Under Zaslav’s leadership, the company’s major focus was on strengthening Discovery’s core networks and programming and expanding the company’s reach into digital media. The aim of the company was to establish itself as a ‘content company’ rather than a ‘cable company’. In its quest to raise capital and grow, Discovery Communications listed its shares on the NASDAQ in 2008..
Shift To Direct-To-Consumer (D2C) Strategy
In the early 2010s, Discovery started increasing its focus on direct-to-consumer (D2C) offerings. Its vision for streaming was ‘bigger than entertainment’. The company aimed to build lifestyle services through its direct-to-consumer products. This strategy took off with the arrival of Peter Faricy (Faricy), former VP of Amazon Marketplace, who joined Discovery in 2018 as CEO of its D2C business. Faricy and his team developed a technology platform for the company’s global direct-to-consumer and streaming businesses..
D2C Strategy For Digital/OTT Platforms
Discovery focused on the direct-to-consumer approach to supplement its existing business model. While it continued to be committed to the Pay-TV cable ecosystem, it felt direct-to-consumer product for digital/OTT platforms would help it to reach more consumers, which would increase revenue. Moreover, the coronavirus pandemic had massively increased the amount of time people spent watching content digitally..
Discovery’s New Streaming Service - Discovery+
In November 2019, during the company’s third quarter earnings call, Discovery announced that it would launch a uniform and unified platform for its streaming services that combined content from across its portfolio, including Discovery Channel, HGTV and other networks. However, the company stressed that it would continue to support linear alongside direct-to-consumer..
Merger With Warner Media To Create A Global D2C Streaming Platform
In May 2021, AT&T, the world’s largest telecommunications company and the largest provider of mobile telephone services in the US, announced that it would combine WarnerMedia’s entertainment, sports and news assets with Discovery’s non-fiction and international entertainment and sports businesses..
The Road Ahead
In November 2021, Discovery announced its financial results for the third quarter of 2021 ended September 30. Total revenue was US$3.15 billion, an increase of 23 percent compared to the same quarter of the previous year. The total US networks’ revenues increased 12% to US$1.85 billion compared to the prior-year quarter. Total International Networks’ revenues increased 44% to US$1.29 billion compared to the prior-year quarter..
Exhibit I: Financial Highlights of Discovery
Exhibit II: Discovery’s Business Segments and Different Channels
Exhibit III: Different Business Model of OTT
Exhibit IV: Top Ten Streaming Players by Subscribers
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