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Can Discovery (DISCA) Tap Markets That NFLX, DIS Overlooked?

Vatsalya Mandava

Growth in on-demand content consumption over the past few years has led to many companies developing related services, especially at a time when cord cutting is increasing.

Discovery DISCA is the latest entrant in the streaming market after it inked a 10-year deal with BBC to bring content from both the platforms to its streaming service. The move is expected to help Discovery offer the “first global direct-to-consumer service” in non-fictional content category per management.

The deal, which is worth $400 million, per Variety is said to be BBC’s largest-ever content deal. Notably, the service is expected to be launched by 2020 and is anticipated to cost less than $5/month for the U.S. audience.

Discovery’s Unique Content Offerings

Discovery’s new streaming service will host natural history and factual programming content, an area where both Discovery and BBC are market leaders, per David Zaslav, President and CEO of Discovery.

Additionally, Discovery and BBC Studios will work in tandem to develop content for the streaming service spanning science, natural history, travel and other factual genres. It will also contain Discovery’s existing content along with original content specifically created for the service.

At a time when Netflix NFLX, Disney DIS and Apple AAPL are inking big deals with top Hollywood content creators/artists to woo subscribers, Discovery’s strategy to offer non-fictional content may help it penetrate a market segment that others have not really focused on.

Additionally, Discovery has exclusive deals in golf.  Its upcoming streaming service may include sports, news and podcasts, per Variety, which will give users a good run for their money. The Zacks Rank #3 (Hold) stock’s global on-demand video streaming service, GOLFTV, has inked partnerships with the likes of European Tour, PGA Tour and Tiger Woods.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Discovery’s Major Competitors

Netflix, one of the dominant players in the streaming market, is likely to bear the brunt of Discovery and BBC deal. The company might lose access to its current BBC shows Blue Planet and Planet Earth once the deal between the companies ceases to exist, per Variety. Netflix, a Zacks Rank #3 stock, had 139.26 million paid subscribers globally at the end of 2018.

Although, Disney is yet to launch its streaming service, Disney+, it is already waging price and content wars. The company is expected to price Disney+ lower than Netflix and is planning to give discounts when users buy all the three streaming services – ESPN+, Disney+ and Hulu at one go. Disney’s existing IP along with Fox’s solid content slate may help Disney+ win subscribers quickly, which is estimated to add 160 million subscribers worldwide, per CNBC as quoted by J.P. Morgan. Disney currently carries a Zacks Rank #4 (Sell).

Apple recently announced that its ad-free streaming service, Apple TV+, will include original movies, shows and documentaries along with subscription-based streaming offerings from providers like CBS CBS Showtime, Lions Gate’s Starz and Viacom. The company has acquired/partnered with Oscar winning content makers to create a place for itself in the competitive market. Additionally, the Zacks Rank #3 stock is expected to spend $4.2 billion on original content by 2022, per Variety.


With low barriers to entry due to decline in technology costs and easy availability of content, competition in the streaming space is intensifying. Apart from the major streaming services in the United States, there are more than 200 (OTT) services available.

Nevertheless, we believe that Discovery’s capability to offer content targeting a niche market coupled with its huge international presence, in over 220 countries, may help it get an easy start in the streaming game. Additionally, the company’s decision to offer an experience that goes beyond content might attract users.

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