Discovery Networks, one of the world’s biggest pay-TV programmers, has amassed a solid business in Asia-Pacific – mid-sized, but highly profitable – after first launching its flagship Discovery Channel brand in the region just over two decades ago.

To maintain Discovery’s trajectory, regional president Arjan Hoekstra, who joined just over a year ago, needs to drive the nonfiction broadcaster deeper into the region’s growth markets, while exploring less obvious growth opportunities elsewhere.

“That was a nice position to start off with,” says Hoekstra, who moved to Discovery after 14-years at Eurosport, most recently as the sports network’s APAC MD. “But of course, the expectation for me is to look for new ways of growth, and really put Discovery at a different level than it was before.”

Discovery’s main pillars in APAC are Australia, India and Japan, three large pay-TV markets that each contribute 20% or more to Discovery’s regional revenue. Of these however, only India exhibits sustained demand for more linear channels, prompting Hoekstra to initiate a new growth plan for Southeast Asia, where it only has one office at present – its regional HQ in Singapore.

In October, affiliate sales VP Theresa Ong was promoted to a new role, GM for Southeast Asia, reporting to South and Southeast Asia EVP, Rahul Johri, who had been overseeing the region from India. Ong’s first job is setting up local teams in four markets identified as levers of future growth – Indonesia, Malaysia, the Philippines and Thailand – with offices due to open early next year.

At the same time, some regional roles in Singapore are being cut as the center of gravity shifts towards a broader in-market presence.

Globally, Discovery’s international business has been tearing ahead, poised to deliver the majority of company revenues for the first time this year, largely thanks to some big deals in Western Europe.

In 2013, Discovery took over Nordics broadcast network SBS, while in 2014 it bought UK production company All3Media (in a joint deal with Liberty Media, a cable company controlled by Discovery shareholder John Malone) as well as a majority stake in Eurosport.

These deals, which helped diversify revenues and expand into new genres such as sports and entertainment, gave the programmer a formidable footprint in Western Europe, a recession-prone region often sidelined by US media majors that Discovery’s global CEO David Zaslav characterizes as a new emerging market.

A tough growth Mandate

Discovery is an ambitious, expansive company, Hoekstra says, underpinned by a genuine culture of risk. Inorganic plays are likely to be the exception rather than the rule in Asia, where M&A options are more limited, although Hoekstra wants to make sure Discovery is well placed to identify and move on any opportunities that exist.

Earlier this year, the broadcaster snapped up two pay-TV channels in New Zealand, doubling its local channel count and becoming the biggest non-domestic player in a US$700 million pay-TV market. Such opportunities, however, are thin on the ground.

“We don’t need to acquire in order to grow,” Hoekstra says. “We will continue to grow in an organic way in the next few years. But we are very tactical and we are constantly scouring the market for these kinds of opportunities.”

A bank would have missed The Living Channel, Hoekstra says, crediting his ANZ head Mandy Pattinson for the deal. Future growth hinges on having people on the ground – a philosophy evident in Hoekstra’s push into Southeast Asia.

“I am a strong believer in decentralizing the organization,” he says, “creating local connections, understanding market sensitivities and cultural aspects, for us to adapt our content proposition but also to identify opportunities that would never come about otherwise.”

Closer collaboration with a large-scale strategic operator in Southeast Asia could help accelerate future growth, while Thailand for example, where the market is gravitating around free rather than pay-TV, could present an opportunity to move into free-to-air, which Discovery has already done in Europe.

The priority, however, is more people on the ground. “We need to open new offices and get closer to our clients and make sure we are a stronger part of the local advertising community,” Hoekstra says.

The reorganization at regional HQ followed a reshuffle of Discovery’s channel portfolio earlier this year, with niche offerings Home & Health and Turbo swapped out with two new channels targeting a broader audience: a factual channel for women called Eve, and a lifestyle channel for men called Dmax. Women’s lifestyle channel TLC also absorbed some content from Home & Health to widen its appeal.

Discovery now offers kids, lifestyle and sports channels as well as factual entertainment in Asia, Hoekstra notes. New channel activity has been relatively mute in recent years, but more will come, including crime offering Investigation Discovery (ID), which recently made its regional debut in India.

Discovery launched three channels in India this year – separately programmed HD versions of Animal Planet and TLC, together with ID, bringing the market total to 11 channels across five languages.

Next could be a local version of Eurosport, which Discovery took over earlier this year, although what form the channel takes depends on the Indian appeal of sports such as cycling, rugby and skiing. “We may need to rethink that positioning,” Hoekstra says. “That’s all part of the process – there’s a strong desire to launch [Eurosport] in India.”

Discovery channels localize well in India, still the main wellspring of its growth, where a concerted digital TV switchover is laying the foundations for future expansion and investment. For the time being, distribution for Discovery will continue to be handled by One Alliance, a partnership with Sony, although deals are now negotiated separately for each company, following a regulatory edict curbing the power of India’s channel aggregators. [Update, November 10: The partnership is being wound up, according to Indian press reports.]

In contrast to India’s growth story, pay-TV penetration in Discovery’s other cornerstone markets, Australia and Japan, appears to have plateaued before reaching a third of households, reining in affiliate growth in particular. Hoekstra wants to see these markets deliver more.

He hopes that a recent product overhaul by Australia’s main pay-TV network Foxtel, which recently simplified channel packs and lowered entry prices to revitalize subscriber growth, will also lift up Discovery, which is Foxtel’s biggest third-party channel provider. A bigger subscriber base will help fuel overall growth for Discovery, which will launch Discovery Kids, aimed at 6-12 year-olds, on Foxtel in November.

In Japan however, where majority-owned JV Discovery Japan manages local versions of Discovery Channel and Animal Planet, operator growth initiatives are more subdued. That said, Discovery has a freer hand nowadays with an 80% stake in Discovery Japan, having bought 30% from its joint venture partner J:Com, the country’s biggest MSO, at the beginning of last year. J:Com retains a 20% stake.

Nonetheless, while Discovery’s local ad revenues have been buoyant, introducing new channel brands is tough, prompting a closer look at alternative distribution outlets. “We’ve got so much content lying on the shelf,” Hoekstra says. “With only two channels in the market, we need to find other ways to monetize it. Many different OTT platforms have launched in the market, that are more or less successful. We are talking to most of them to see how we can make that work. Japan may be a good test market for us to do that.”

korean confidence

Hoekstra is also recruiting a country manager for Korea, where Discovery’s profile is relatively low key, anticipating fresh opportunities as the Free Trade Agreement allows Discovery and others to own and operate local pay-TV channels. “There’s massive ad revenue there, incredible penetration of pay-TV,” he says. “There are low Arpus but pay-TV is embedded in the viewer’s mindset.”

In March meanwhile, Discovery announced a tie-up in China with one of the country’s biggest pay-TV companies, Wasu Group. As part of the deal, Discovery will provide factual and lifestyle content, together with consultancy services, for digital pay-TV channels that can be carried nationwide. Wasu has launched four so far.

Local production could turn the Wasu partnership into a major source of new revenue, but Hoekstra is taking the deal, a long time in the making, step by step. “We are confident this partnership will pay off for us, but it’s in an early phase right now,” Hoekstra says. “It’s too soon to say what it could be long-term.”

This article also appears in the Q3 2014 edition of Media Business Asia magazine.