While there’s been a lot of talk in the cable industry about skinny bundles lately, it’s not something Discovery CEO David Zaslav seems concerned about.
During Discovery’s earning call Thursday morning, Zaslav said he didn’t expect skinny bundles to take hold in the U.S.
He also said that Discovery would like to have a bigger piece of its OWN joint venture with Oprah Winfrey, and that Winfrey has options to sell her stake in the network beginning this year.
Skinny bundles are a concern on Wall Street because they could mean fewer subscribers and less distribution revenue for some cable programmers.
But Zaslav said that as appealing as a lower-priced skinny bundle might seem, “most consumers seem to want the big bundle.”
The stock market has also been spooked by a decline in the number of pay-TV households. But Zaslav noted that distributors’ subscriber numbers have turned around.
“We’ve seen it, but we haven’t seen the full effect of it because there’s a few month gap between when they announce and when we actually get paid, but it’s very encouraging that there seems to be a change in the universe dynamics.”
Last week, Bob Iger, CEO of Disney, also said he’d seen an uptick in subscriber numbers at ESPN.
Zaslav said that the OWN Network was doing well. “We took a channel that was in 75 million homes and had no sub fees four years ago. It's in almost 90 million homes. It's making a lot of money,” he said.
Discovery CFO Andy Warren said that OWN’s free cash flow goes to pay down the money Discovery lent it to launch. In 2015, Discovery got $85 million from OWN, up $20 million from 2014. OWN owes Discovery $380 million, down from $500 million two years ago. “ We expect that loan to get fully repaid over the next several years,” he said.
Winfrey has put options to sell some of her stake in OWN back to Discovery over the next six to seven years, beginning this year, Zaslav said.
“We love the channel. If over time . . . we have an opportunity to own more of the channel, that's only a good thing for us,” he said. "We're very confident in it. We think it has a great niche and some very strong IP. And over time, as our interest grows, if we have an opportunity to consolidate it, that would be very favorable for us."
