Discovery’s acquisition of two local pay-TV channels in New Zealand looks like a shrewd move by the broadcaster, capitalizing on scarce opportunities in the region to invest in scalable, broadly synergistic brands.
New Zealand is a small but important market for Discovery, where it enjoys a strong long-term relationship with incumbent pay-TV operator Sky TV, which has penetrated 51% of TV homes.
The two channels, The Living Channel and Food TV, both carried on Sky TV’s basic tier, generate a combined revenue of US$10 million with a ~30-35% profit margin, according to industry analysts Media Partners Asia (MPA).
The deal gives Discovery a four-channel portfolio with Sky TV, including the core Discovery Channel and TLC. As a result, Discovery becomes the only global major with a scalable proposition in New Zealand’s US$700 million pay-TV market.
Such opportunities, however incremental, are vital for major broadcasters operating in Asia-Pacific.
“The future for these players, especially outside India, is no longer about one big thing but lots of incremental things through acquisition and organic strategic moves,” says MPA director Vivek Couto.
The move in New Zealand also helps define a new relationship for Discovery with its pay-TV distribution partners. A key goal for Discovery's new regional CEO, Arjan Hoekstra, is operating as a partner and investor in content and new channels, rather than being a mere channel wholesaler.
This transition is critical for Discovery, which is looking to take its business to new heights in Australia, Indonesia and Malaysia – markets where a large local incumbent with increasing scale has acquired and produced a wide range of in-house channels.
The consolidation of Eurosport is also positive, although how Discovery plans to grow its sports business in Asia is an intriguing question.
Sports and entertainment are not core strands of Discovery’s DNA but global management is keen to broaden the content portfolio.
New Zealand is a rare market where local pay channels in the factual and lifestyle segments are still viable. By contrast, demand tends to focus on entertainment and sports in core Asian markets, although platforms are keen to reinvigorate the market for premium, pure-play documentary offerings.
That could be another opportunity for Discovery too.
As a leading independent consulting and research provider focused on Asia media & telecoms, MPA offers a range of customized services to help drive business development, strategy & planning, M&A, new products & services and research. Based in Hong Kong, Singapore and India, MPA teams offer in-depth research reports across key industry sectors, customized consulting services, industry events to spread knowledge and unlock partnerships, and publications that provide insights into media & telecoms.
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