1. Discovery Scores With Streaming

So much for trading linear dollars for digital dimes.

Speaking at the MoffatNathanson Media and Communications Summit, Discovery CEO Dave Zaslav explained how a combination of MVPDs undervaluing Discovery content and solid profits from streaming are making the latter a very profitable business for Discovery.

I’ll spare you the myriad of revenue and ARPU stats and cut straight to the money line: according to Zaslav, the service could lose one million cable subscribers and make up the lost revenue (and then some) by signing up just 650,000 Discovery+ subscribers.

Why It Matters

The industry (and Wall Street and the advertising community) have long lived in fear that the move to streaming would completely undercut the massive profits TV networks make and lead to ruination and more.

Seems that is not the case.

Granted, Zaslav is correct in pointing out that the various MVPDs undervalue Discovery, the corollary to that being that they likely overvalue the broadcast networks, but regardless, the move to streaming will not sink those networks either.

Discovery makes more money from its ad-supported subscribers—ARPU is around 30% to 40% higher— but Zaslav said the ARPU is still the same or better for ad-free viewers who currently pay just $7/month.

This is good news for network affiliated streamers like Paramount+ and Peacock, both of which have to deal with the issue of cannibalizing subscribers from cable, and for HBO Max, which is looking to expand on HBO’s audience, while adding in viewers from TNT and TBS. (CNN’s place in the Max universe is still up in the air as rumors of a sale still abound.)

Max’s high prices—$15 for ad-free and $10 for ad-supported--may make signing up subscribers tougher, but if the service can make up the difference on ad sales, they should be able to make it work.

What You Need To Do About It

If you’re an investor, stop worrying that the shift to streaming is going to destroy the TV industry. Everything is going to be fine.

If you’re a network executive, Zaslav’s math should be more effective than Ambien at helping you to sleep at night. That doesn’t mean you can just kick back though. You need to provide a service that people want to subscribe to, and to provide value to advertisers they want to pay for. Discovery is in a unique position in that no one else makes that sort of nonfiction programming. You, OTOH, have competitors. Which means don’t just jack up subscription prices because you think you can.

If you’re an advertiser, figuring out streaming (or “CTV” as many of you call it) isn’t a walk in the park, but given the value of the data you’ll be able to get from it--and the fact that your audience is moving there whether you advertise on streaming or not--it’s worth it.

If you’re covering the industry and are not all that familiar with it, remember that the shift to streaming is going to be very, very gradual and it will be many, many years till traditional linear goes away, or at least gets to the point where it’s essentially irrelevant.

2. Vizio Scores With Ads

Smart TV OEM Vizio had its first post-IPO earnings call this week and the big news was how quickly its data and advertising business was growing. 

As in triple digit growth.

Why It Matters

The growth is indicative of how rapidly the overall smart TV ecosystem is growing. OEMs like Samsung, Vizio and LG are following in Roku’s footsteps and launching their own FASTs along with their own ad sales teams. Throw in all the ACR data they’re getting from opted-in users and you’ve got a very nice business model.

A new emphasis on creating a user-friendly interface for their TVs rounds out the picture, as does the rapid growth of streaming and streaming services, most of which have also set up shop on the big three OEMs, making external devices superfluous.

This last piece will be an interesting space to watch: after years of basically ceding the market to Roku and Amazon, new players like Google, Comcast and Walmart are trying to enter into the streaming device market. All well and good, but if consumers discover that their smart TV has an equally useful interface, one they won’t need to pay extra for, there’s not really going to be a market for these new devices.

The key here will be for the OEMs to actually make consumers aware of their improved interfaces so that when the old Roku finally dies, their first move is to check out the smart TV’s interface rather than to buy a replacement.

What You Need To Do About It

If you’re an OEM, keep on keeping on. Keep improving the interface and letting people know about it, keep pushing your ad sales and data capabilities and trumpeting your ability to enforce frequency capping across multiple platforms.

If you’re Roku, international expansion is your next move, and I’m wondering if you can or should buy an actual OEM rather than just licensing your operating system which leaves you exposed to competitors with really deep pockets whose names begin with “A” and “G”.

If you’re interested in the emerging smart TV ecosystem, check out this panel I’m moderating at the Stream TV Show next month, featuring LG, Samsung, Sony and Vizio.