What is happening at Discovery India?
It’s not clear if the company can weather a fall in viewership and revenues as it attempts to reinvent itself
Which of these is true? Discovery Communications India is losing viewers, revenues and key employees. Its 12 channels, such as TLC and Animal Planet, together lost about 22 per cent viewership over the past three years. So did flagship Discovery going by Broadcast Audience Research Council (BARC) data. The Indian arm of the US-based $6.5 billion factual giant Discovery Communications Inc could see revenues either fall from, or stagnate at an estimated ~425 crore, say analysts.
Discovery Communications India is on a roll. It is investing in dozens of locally-made shows. India’s Best Jobs about 13 people who turned their passion into a profession is already airing on Discovery. There is Queens of Comedy, a talent hunt for female comedians, on TLC next month. DSPORT, a sports channel, came earlier this year. Jeet, a factual general entertainment channel, or GEC for smalltown India should be out in the next sixeight months. A rural, free-to-air channel is being researched for an early 2018 launch. There is a suite of digital products aimed at mobile-totting millennials being rolled out in August. The company is on the lookout for acquisitions. All of this has meant a hiring spree — Discovery India will go up from 140 people in 2016 to about 220 by the end of this year.
Confused? Funnily enough both the narratives are accurate.
Discovery has hit an air pocket. This happened even as it embarked on a much delayed transformation to deal with the challenges TV faces. The biggest is an “erosion of pay TV across the world because of the shift from linear (plain broadcasting) to non-linear (digital),” says Arthur Bastings, president and managing director, Discovery Networks Asia Pacific. The shift to Netflix, Amazon Prime or others at one-fourth (or even less) than what viewers usually pay is hitting every cable and broadcast firm including Discovery. In the four years since 2013, its Asia revenues have fallen from $320 million to about $280 million, according to Media Partners Asia.
(Both Bastings and Karan Bajaj, senior vice-president and general manager for South Asia, spoke freely and at length to Business Standard but declined to comment on the numbers.) The India pressure points “India is insulated because the macro environment is different, pay TV is not big. If I take India out of the equation, pay TV is challenged. But, video is not; video is buoyant. So for us, the question is how to be a multiplatform player instead of a single platform (TV) one. Also, a greater percentage of video consumption is factual and lifestyle. The sector is not in decline. Therefore, it is a question of how to reshape the organisation to deliver that,” says Bastings who joined Discovery in 2015 with a mandate to bring that transformation. In 2016, he hired Bajaj to head India. Within months of Bajaj’s joining, many of the old hands quit and there has been a steady murmur about, “What are these guys doing?” and “What is happening at Discovery?” Three things says Bajaj. One, Discovery’s core audience, the top 5-10 million of India’s 240-odd million homes are part of the shift away from linear TV towards digital. “Our number one priority is building a robust core business. On the core side, there has never been a loss of form. It is simply a question of figuring out how to get the consumer interested across platforms,” says Bajaj. This means more local content something, “We have not been heavily focused on in India,” says Bastings. All the new shows being commissioned then is the building of its content pipeline for both digital and TV in India.
“Factual viewership on digital is about 10-15 per cent of the total against 2 per cent on TV,” points out Bajaj. This two per cent has been falling in part because of the shift from TAM’s urban skewed sample which captured a larger proportion English and niche genres to BARC which has a 67.33 urban to rural split. “There has been a 30-40 per cent drop in the category viewership,” adds Shailesh Kapoor, chief executive officer, Ormax Media, a consulting firm. It explains why Discovery’s share has been falling, says Bajaj.
Two, Hindi and other GECs command more than 55 per cent of all TV viewing in India and a bulk of the ~58,830-crore TV industry’s ad and pay revenues. So the second lever of Discovery’s strategy is to reach the next 100 million homes with Jeet and the rural free-to-air channel. This has raised eyebrows across the industry. “Discovery is a mix of the ratings plus the environment. If you only go for ratings, you could end up below the smallest entertainment channel,” points out one analyst.
A GEC is an expensive risk. Remember Imagine, 9X, Epic and dozens of others. It means stepping out of a market where Discovery is the leader to fight with the big boys of Indian broadcasting. It pits Discovery a minnow at ~425 crore or so against Star and Zee, each with a top line of over ~10,000 crore at a group level.
Clearly, Bajaj has heard these arguments earlier. “It is a creative and marketing risk,” he agrees. But, points out that Jeet is not exactly a GEC the way we think of it, with saas-bahu serials et al. “It is a GEC in a Discoveryish way. These are stories that feed off fact, that blur the lines between fact and fiction,” he says. The big show that Jeet plans to start with is a 65-part scripted, dramatised version of yoga exponent Baba Ramdev’s life. There is Saragarhi on the 1897 battle between 21 Sikh soldiers and 10,000 Afghans in the North West Frontier Province (now in Pakistan).
“We are choosing stories in mass entertainment, but with a level of inspiration, like the films Dangal or M S Dhoni,” says Bajaj. The idea is to expand reach into small-town India and generate appointment viewing and therefore ad revenues.
That brings us to the third thing that Discovery is doing – sports. DSPORT is run in association with former ESPN CEO R C Venkateish. It uses rights owned by Discovery’s Eurosport, to football, golf tournaments or horse racing, among others, to offer an alternative sport channel. The big question “A strategy to go mass or free-to-air or aggressive on sports, now in 2017, will be risky and expensive. But, it is long overdue,” reckons Vivek Couto, executive director of Singapore-based consultancy, Media Partners Asia. That is the point. Isn’t it too risky and too late? For very long Discovery India had a steady 50 per cent operating profit because its content costs were shared globally. That was the time to invest in, acquire and build businesses. It was evident that BARC’s bigger sample would queer the pitch. It was also evident that factual lends itself to digital. That is why ratings had started dropping three years ago. The signs were already flashing red.
There are different, unverified, theories about why it didn’t happen. But, it is clear that Bastings and Bajaj were brought in to shake things up in Asia. And, they have.
The question remains — after it is shaken, stirred and redone, will the new Discovery be bigger and better?
OUR NUMBER ONE PRIORITY IS BUILDING A ROBUST CORE BUSINESS. ON THE CORE SIDE, THERE HAS NEVER BEEN A LOSS OF FORM. IT IS SIMPLY A QUESTION OF FIGURING OUT HOW TO GET THE CONSUMER INTERESTED ACROSS PLATFORMS KARAN BAJAJ Senior vice-president and general manager for South Asia, Discovery