tv Bloombergs Studio 1.0 Bloomberg April 21, 2018 5:30am-6:00am EDT
♪ david w.: he leads the company that operates four of the most popular cable channels for women, producing a wealth of content distributed around the world. after helping create msnbc and cnbc, david zaslav took the helm to streamline the company and relaunch channels so he could take it public within the span of a year. since then, discovery's market cap has quadrupled and discovery is coming to terms with a new world where viewers increasingly turned to streaming services for their planning, and moving away from the core cable.
to makeslav is looking the biggest deal of his life, on content. zaslav, thank you for joining us. david z: great to see you. david w.: you just completed the biggest deal of your career, $12 billion for scripps. why did you do it? david z: there is a financial reason and also a strategic drive that we think could really work for us. we are in the cable business. scripps is in the cable business. it is what we do for a living, what we know had to do, what we do every day when we come to work. puttinguite comfortable these companies together, and the synergy gives us the opportunity to have a target of doubling our free cash flow. we generate about $1.4 billion in free cash flow.
scripps generates about 8 billion cash flow. synergy, soth cost in a turbulent time, if we could emerge with almost $3 billion of cash, it creates a moat in a turbulent time. we are different from most media companies in the world, and there are a lot of great companies. whether it is disney or rupert or comcast, nbc, cbs, they are mostly into scripted and movie business. netflix, amazon, that whole side of the business is focusing on, as if it were a soccer field, the ball is scripted series and scripted movies. it is crowded and getting disrupted. the number of scripted series have gone from 200 to over 500. apple and amazon and netflix alone are spending almost $20 billion on top of these companies. we look at that and we say that
we are not that. we are on the other side of the business. we own all of our content. it is real life entertainment. we see ourselves as a global ip company, whether it is with opra or science or cars. with scripps having food and hg and travel, we put it all together, and we are on a different area of the field. we say very good luck to them. i think there's a lot of great companies. it will be very disruptive. our game is to take this great brands around the world and as people over the next few years look to pull content onto devices and phones, we think the functional value of food, home, cooking, science, cars, that will do better, or we will have a chance to better than if somebody was going to pay to watch "the crown" on a mobile phone.
a lot of it is about owning ip and learning to get to mobile. david w.: that is the big disruption everybody in media is talking about. how will this help you get to scale, as it were? david z: we are about 20% of the viewership in the u.s. at any given time, and we have four of the top six or seven channels for women. we have own, number one for african-american women. we have a great menu to offer. discovery is in 220 countries. we have an average of 10 channels in every single country. we could do what very few media companies could do, a global offering of food, a global offering of all of our content. david w.: in this new world of streaming, will viewers be watching for platforms like hdtv or discovery, or programs like
thrones?"," "game of in generatingl owning everyby piece of ip we own effectively, except for sports, we are long ip. we spent a lot of money to own it on all platforms and that gives us the opportunity -- if amazon said, i want to do in offering globally, the only other media company that could do that would be disney and that would be in the kids space. we would raise our hands and say, we have a great offering. in the end, people that love food are going to pull it. we are not sure exactly how it is going to work, but we think the fact that we own all of our content, and we have passionate viewers that have, that love us like they love a sports team.
able come home and put on hg all .ay long, or put on food we have a sustainable growth business with our synergy and all this ip we can take direct to consumer, and we have started to do it. david w.: can you win in streaming without going through the bundlers? do you have to be on hulu, youtube, or can you do it directly? david z: we don't know. on almostd, we are every skinny bundle. or youtube,n hulu but we are on most of the others. people love our channels. we would like to partner with our distributors, because they helped us told our business, and in many cases we are, partnering with at&t on directv now, with brian on comcast, with his offerings. that is the best way to do it regionally. there is an opportunity for us
to go direct to consumer ourselves, which we are already doing in a number of areas, but we could also go to those big companies. if you take a look at what nbc, abc, cbs, and fox spent three years ago, and how much is being spent by apple, netflix, and google, that is a massive amount of share shift going on. these are real global companies, the likes of which we have never seen. if any of those companies wanted to offer for $5.99, a compelling family-friendly service, we would either be most of it. we would argue we would like to be most of it, or we could be all of it and see how it goes. anywhere you go in the world and you say "discovery" or "animal h," people value our brands and know them. david w.: how do you make the
decision to go direct to consumer or through a middleman? david z: right now, it is not a fair fight because the direct to consumer business, the netflix, the amazon, we used to trade at about a 14 multiple in media. there was a view that this great revenue stream would go on forever. the view now is that it is getting disrupted by some of these direct to consumer platforms that are global. there is a question of who will be emerge and who will be the winner. looking now, it is only the second or third inning, but we have carved out a very compelling spot of quality brands that people love, that we can offer globally, and we can offer them ourselves. david w.: he stepped up big time on sports. that was a variation from what people expected. why does that make sense for you? ♪
david w.: you talk about disruption in media. there was a time when you were the disruptor in chief. i watched you as you created msnbc, you created cnbc. how does this compare with that disruption. broadcast,srupted what did you learn from that experience that you can apply now? david z: patients. -- patience.
in that case, we were committed to take the broadcast business into cable. it is important because the business you think he will launch, that will work is never the business that works. -- you will launch, that will work is never the business that works. the audience will tell you. that is what most businesses are about. when we launched with the oprah winfrey network, we had a dream that it would be about living your best life we looked strategically about the space and said, we can do this, but when we went on with the content, super soul sunday went well and the rest went away. we had to figure out, what will they come back for? it took a lot of years, but we started to listen. what do you like? we do not want everyone to watch, but the oprah winfrey network is never one for african-american women.
we have broken our company in half, essentially. half is about growing our channels, doing what we do as well or as better than anyone in the world. there is a whole group that has to figure out, how do i get over the top? what do people want when they consume content over the top? you have to be willing to recognize failure and use it optimistically. we know that now. david w.: you can do it without the blockbusters. david z: the way people watch our channels, it is hit driven. me, come home and hg gets discovery is my channel. tlc in middle america is the channel i love. that is how they curate. where do i get nor is? that is the business we're in. they think it will be sustainable and ultimately, they can pull a big, expensive platform, or if they are looking to pull something, it is
family-friendly with brands and characters they know for a lot less than i would desk they would have to pay, we look different. we will see if it is an aggregate offering, an individual offering, but first we have to execute. david w.: you stepped up big time on sports. that was a huge variation from what people expected. david z: we are in every country. we have a sales team, distribution team, creative people, marketing people, and strategic people. we kind of know each country, so when we looked at sports, eurosport was not being fed into every country across europe so when we bought eurosport, we our salesan use infrastructure and distribution infrastructure to drive more carriage. we can use our sales and marketing people, and it was a little bit of a leap but it was
driven by the idea that content used to be about getting inside of the television box. even if you had content that was just ok, second and third choice, you did ok. ton we launched our direct consumer sports player three years ago in europe, we reach across 750 million people in cycling,th tennis, winter sports, summer sports, olympics. we have a great offering. , eightlion people dollars, we should do terrific. we were down eight things we knew for sure and eight of them were wrong. the users told us. they said, we tuned in for the french open but we did not want to watch tour de france. they told us that, a be the most interesting take away that we applied to the olympics, when aople consume content on device, they expect to hit the device and see content and then
a few hours later, you need to multiple publish. if speedskating is starting at 2:00 in the afternoon, people have to get up in the morning and see a one minute video or 21 minute videos, or some information about. we downloaded 700 pieces of short form content in 21 like which is every day to our olympic player, and that is one of the reasons we were able to advocate to subscribers. they love the sport's ip, but when people look at content on a device, they expect to be entertained every time they hit it. if they hit it and nothing is new, they are disappointed. david w.: can you do that and step up into the high-priced sports projects? that sounds like espn in the early days. they had to get in the nfl and nba, and that costs enormous amounts of money. david z: opportunistically, we
have taken football. we have not taken football what we get in a bidding war with anyone. if you want to offer your content on a pan-european platform, it is us. the difference between the u.s. and europe is in the u.s., it is one culture, one language. everybody likes the same four sports. 80% of viewing is football, baseball, basketball, hockey. in europe, there is a number of sports that are number one in northern europe and number 10 in southern europe. we have been effective in getting a lot of content, and all of the content we have with weosport, as much as we have have gotten it long-term and we own it on all platforms. david w.: you have scripps. you need to execute on that.
as you say, you need to execute on that now. is that enough for discovery? are you on the outlook for further acquisitions or do you need to get bigger scale? david z: we are in a different place on the soccer field than everyone else. if we can own all of those brands globally, scripps never took hg and food and traveling around the world. we have an opportunity to take all that ip, converted into 48 languages, and spread it around. that will be a revenue synergy as viewership increases, and we think it will. i like our hand here. we have some work to do, pay down some debt, prove that we will generate that free cash flow and that we did build a moat. at the same time, we will be working really hard about learning how consumers consume content on devices. we are talking to every distributor because we are better off with somebody that is already in business for you -- with you and you are paying a
$100 bill, and you have a chance to check a box and pick us. isay in the u.s., there probably 25 million or 35 million subscribers with broadband. service thatit -- is being marketed heavily is netflix. the industry built us, we built them, and together, i think we will come up with something compelling in terms of the skinny bundle. it is not sensible for netflix have all that field. david w.: you said you have to pay off some debt, because you have more debt on your balance sheet than other companies. how are you going to buy scripps? david z: as we look at putting these businesses together, we have been working on it very hard for six months. onee are one over
companies. they have 12 channels, we have six. we have 650 salespeople, they have 550 salespeople. and their people are really good. we put some of their people in charge of our new structure, and the idea is, who are the best and brightest? when it comes to nonfiction, who are the best producers of nonfiction content and who is best at monetizing? we looked and said, in some areas they are better than us, in some areas we are better than them. we will put these together. we will spend $3.5 million on content and maybe more. we are in the business of creating stories and characters, and getting people to turn on their tv and love it. david w.: you have referred to john malone, a shareholder that you know well. johnis it like to have malone as somebody you can call up and say, should we do this or that?
david z: i think about my last 30 years in this business and it is sort of like what you want for your children. you are who you hang out with. you, the helps to find narrative that you here, the questions you hear. i went back over the last 30 years, 15 years listening to why jack did not want to do an acquisition we brought or what we need to do with cable. family, and bob miron, who was a genius and has been in the cable business and built bright house, and john malone. when i think about where people ,hould be spending their time yes, you would like to get the right job and think you will make some money. i took a 50% pay cut to go to nbc from a law firm because i thought, i get to hang out with the guys at the peacock and maybe someday i will get to meet jack a lot of the way i see the world, i still talk to jack a lot of times.
i am hearing jack's voice. i am hearing bob miron and newhouse's voice, and john's voice. for that alone, i am one of the luckiest guys. david w.: you are now running discovery, which appeals to a lot of the middle of the united states. i understand the president is a fan of shark week. david z: i hope he is a fan of a lot of our stuff. david w.: you helped create msnbc. that is a channel in a very different place. what do you think about the media landscape in the united states in terms of politics? it has become much more polarized. david z: i can just say the business changed. msnbc, brokawed and i, there was a group of us, and jack said we will launch the best news network in america and use the number one news division in america to do it. we had an amazing library.
we structured a deal with microsoft to get them in. that was our ambition. i am not going to game out the different news networks in america, but we have to be practical and recognize that at least some of them are following that model. on the one hand, you want to do the best journalism possible and the other hand, you want people to watch you for as long as possible. part of the ways we determine our success, are we in third place, are we in first place? how many people are watching us and loving us? that is the journey, and i will not be one of the guys to figure that out. david w.: how do you keep score? i see that now you jumped up in the rankings, broadcast and cable, a big step up with scripps. is that the way you keep score? is that how you tell you are succeeding? david z: no, because a lot of
books have been written about scale. we are staying in our own lane and we have made a decision, if you do not love us, if you are not a passionate viewer that loves survival or science or crime, go find -- find some other channel. we want global audiences that really affiliate, have a passion for our characters and our message. a big piece of that is we are not going for the best rating. we are going for the most potent audience that says, they get me. when i go there, i see something i love. if we put anything on these channels that looks like we are going for ratings, they would immediately say, what is this doing here? they are quite clever. you have to figure them out on tv and figure them out in terms of the devices, and what they
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