With the global cable market becoming increasingly complicated with the rise of "cord-cutters," Discovery Networks
As consumers find more ways to consume television programming through non-traditional means, sports programming provides networks with chunks of programming that has high demand for real-time, traditional viewing-driving advertising prices up during these blocks. But with this acquisition, Discovery's biggest challenge is driving up subscription rates across Europe, despite the continent having significantly less pay-TV subscribers than the United States.
In addressing this concern, Discovery has scoured Europe's diverse sports scene and signed over 75 rights agreements to exclusively stream big-name events-like Wimbledon or Formula One-in certain territories. Despite all of these contracts, the company's most high-profile rights agreement is a $1.4 billion, eight-year contract to exclusively broadcast the Olympic Games in Europe from 2018 to 2024. While continent-wide viewership statistics are not available, the Olympics typically attract record-breaking television audiences, with the BBC reporting over 20 million viewers for one track event alone at the 2012 Summer Olympics. With several years to build up its programming and distribution strategy for the 2018 Olympic Games, Discovery must work to recoup its $1.4 billion investment in the rights.
Beyond just the Olympics, Discovery seems to be eyeing new advertising strategies in Europe. Before the acquisition, Eurosport sold ads on a pan-European basis, but Discovery revamped efforts to sell Eurosports advertising slots by region, as it has sales and distribution teams in place across the continent for its existing networks. Additionally, Discovery is touting the Eurosport Player, which allows customers to stream the network's sporting events live online for €8 a month.
Some analysts are skeptical of Discovery's investment in European sports programming, mainly due to the fact that many believe sports and television culture to be vastly different in European nations and the United States. While Americans watch almost six hours of television per day, European audiences consume less than four. Despite this, Eurosport still appears to be the strongest sporting channel on the continent, with 205 million paying subscribers in 91 countries.
No matter how strong Eurosport's numbers are, though, it is clear that this is a long-term investment in sports rather than an acquisition with a short-term payoff. The company will likely not see returns from the purchase for several years, especially with the high-priced Olympic contract that does not start until 2018 further eroding any potential profit to be gained. But if the company finds ways to grow Europe's consumption of both television and live sports, this acquisition can bring Discovery out of its second-tier status and into tighter competition with some of the largest media conglomerates around the world.
