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Zaslav, former chief of NBC Universal‘s cable services, assumed his place in the big media Serengeti in 2007 when he took charge of Discovery (DISCA), which has 13 channels in the U.S. including Animal Planet and TLC.
Since then, he has grabbed attention with initiatives designed to transform what was becoming an also-ran television service into a vigorous worldwide rival to giants including Disney, NBC Universal, News Corp., Time Warner and Viacom.
“He’s rejuvenated Discovery and taken it to a different level, which is really pretty tricky,” says former NBC Universal CEO Bob Wright, who was Zaslav’s boss for about 20 years and now is a senior adviser at Lee Equity Partners. “They’ve re-created the novelty of what Discovery was in the mid-1990s.”
About 885,000 viewers were tuned in to Discovery’s channels at any point through the day in the second quarter, up 10.4% vs. the same period last year with shows such as Discovery’sDeadliest Catch and MythBusters, Animal Planet’s Whale Warsand TLC’s hit Jon & Kate Plus 8.
Zaslav, 49, says the best is yet to come. The Brooklyn-born former lawyer plans to launch a women’s channel with Oprah Winfrey in early 2010, and a kids’ channel with Hasbro later next year. He’s also talking with director Steven Spielbergabout producing high-profile shows about science.
“The first thing (Spielberg) told me was that his kids’ TVs are set to our channels,” Zaslav says. “Our channels are interesting and safe. Then he went on to talk about how he spent the whole weekend watching (old episodes of) Deadliest Catch to get ready for (this season’s) premiere episode. When you think about Discovery, it opens any door.”
Keeping an eye on all-important ad sales
Yet survivors in the Darwinian world of cable programming need compelling shows and marketing, not just star power. For example, Winfrey’s widely publicized role as a co-founder of women’s channel Oxygen in 2000 wasn’t enough to keep it from being an also-ran service before NBC Universal bought it in 2007.
Zaslav’s plans also may seem too extravagant if ad sales, which account for 45% of his company’s revenue, don’t pick up in a big way. Discovery is “not immune from the broader ad market, and every network owner has to fight for ratings every day,” says Gabelli & Co. analyst Christopher Marangi.
Still, Wall Street is optimistic. Discovery’s shares have rocketed 55% to $21.68 so far this year, a period when the benchmark Standard & Poor’s 500 has appreciated 10.5%. That’s due in part to its status as one of just two pure-play cable programming stocks (the other is Scripps Networks): They look good in a recession because about half of their revenue is guaranteed; it comes from payments by cable and satellite operators.
Investors also like the fact that Discovery owns almost all of the predominantly non-fiction programming it airs. These shows appeal to audiences around the world ? including growing markets such as India and China. About a third of Discovery’s revenue comes from outside the USA.
Bernstein Research expects net income from continuing operations to increase 114% this year to $559 million on revenue of $3.48 billion, up 1.2%.
“David’s been reaching out for talent and energy in a number of directions, and it’s reflected in the success so far of the business,” says Liberty Media Chairman John Malone, a Discovery board member who controls 31.3% of the votes from his stakes in the company’s three classes of stock. “What can you say? The guy’s been terrific.”
Zaslav has succeeded in part by injecting show-biz pizazz to his most popular channels.
At Animal Planet, “The original theory was that all the programming should be rated G,” Zaslav says. “But the animal kingdom isn’t rated G. A lot of those stories about nature and animals involve mysteries and danger. So we relaunched Animal Planet as a more aggressive and compelling brand. And we’re finding some meaningful success.”
The bullish case for the company, though, is based on faith that Zaslav will give an adrenalin shot to some of Discovery’s widely distributed channels that have failed to excite viewers and advertisers.
“A lot of the channels we have, no one’s ever heard of,” he says.
The company has already turned Discovery Wings into the Military Channel, Discovery Home into the ecology focused Planet Green and Discovery Times into Investigation Discovery, which is devoted to true crime stories.
The boldest makeover will take place at Discovery Health, which reaches 76 million homes, when Winfrey transforms it into OWN: The Oprah Winfrey Network. The hope is that Winfrey’s mantra, that people should live their best lives, will be as successful on cable as O, The Oprah Magazine has been for her company, Harpo, and Hearst.
“Look at some of the (television) talent she has developed: Dr. Phil, Dr. Oz, Rachael Ray? all these people,” Zaslav says. “She has a great eye for talent. If we can own this niche, then this could be a very big channel for us.”
He has a lot riding on this attempt to draw viewers and advertisers from established women’s services, including Lifetime and WE. In addition to the channel that Discovery contributed to the joint venture, it agreed to lend $100 million through 2011 ? to be paid back only if it’s profitable. Winfrey contributed her website, Oprah.com, and the library of her daily TV shows.
Kids are a big part of Discovery’s future
The venture with Hasbro appears more straightforward. The toy company paid $300 million in May for 50% ofDiscovery Kids, which reaches 55 million homes. It will manage and relaunch the service under a new name, still undetermined, with several shows based on Hasbro games, including Scrabble and Trivial Pursuit, and toys such as G.I. Joe, Transformers and My Little Pony.
“Young people today consume more than eight hours of media over a six-hour period, so they’re looking at multiple formats at once,” says Hasbro CEO Brian Goldner. “We’re going to provide our content in a number of different formats that they can enjoy in a complementary way between the network, smartphones, online and off-channel.”
That may be a shrewd strategy, but some activists say it’s a lousy idea to blur the line in kids’ minds between entertainment and advertising.
“It’s another slide down that slippery slope,” says Susan Linn, director of the Campaign for a Commercial-Free Childhood. “Discovery presents itself as pro-environment, but they just bought into a channel that sells kids lots of plastic junk.”
Zaslav says that the partners are determined to produce high-quality shows. “Kids are smart, and creating an infomercial about a toy wouldn’t work ? and we wouldn’t allow that to happen,” he says.
Discovery needs to stay on good terms with parents and kids: One of its fastest-growing businesses is Discovery Education. Subscribing schools get streamed video clips that illustrate lessons that their state’s mandated curriculum requires them to teach. The service, which recently became profitable, serves 60% of all schools that have computers in their classrooms, and 90% of the ones that use a streaming video service.
That pipeline to the classroom could become quite valuable as schools increasingly see online services as economical, engaging and always-current alternatives to textbooks. Discovery is already considering potential partnerships with textbook companies.
Discovery “has bitten off a lot” with its far-flung initiatives, Malone says. That means, “The challenge now is execution.”
To address that, Zaslav has called on a Murderers’ Row of cable executives to rival the 1927 Yankees and has given them wide latitude to run channels as independent businesses. For example, he has former Viacom CEOTom Freston advising OWN, former Fox Kids chief Margaret Loesch running the new venture with Hasbro, and former Court TV and Hallmark Channel chief Henry Schleiff at Investigation Discovery.
Meanwhile Zaslav immerses himself in a frenzied schedule of meetings and trips to sets of his TV productions, where he’s simultaneously cheerleader, counselor and decision-maker.
“The CEO shouldn’t be doing everything,” Wright says. “But the CEO is responsible for creating morale, high expectations and making sure that people are able to do things: You can’t ask people to do things if they don’t have the resources and the know-how. And he seems to have pulled together that organization in such a fashion that they’ve been able to do some very clever and successful things.”
John Ayers 