Welcome To The Jungle: Discovery Betting On New Streaming Service

Big news: Discovery released details on their upcoming DTC streaming service.

Key details for Discovery+:

1) Launching on 01/14/2021 in 25 countries
2) 55K episodes from 2.5K shows
3) 50 new original series
Discovery+ channels include:

1) Animal Planet
2) Discovery Channel
3) Food Network
4) TLC

Big question #1: What is the business model for Discovery+?

Quick answer: Subscription base with ad and ad-free offering.
Monthly pricing tiers for Discovery+:

1) Ad-free – $7
2) Ad-supported – $5

Big question #2: How do the economics compare to linear?

Monthly ARPU for Discovery:

1) Discovery+ (ad-supported) – $9
2) Discovery+ (ad-free) – $7
3) Discovery linear (ad-supported) – $7

Big question #3: What are Discovery+ ad CPMs going to look like?

Quick answer: Discovery is estimating that addressable ads on Discovery+ will have 3X higher CPMs!

Flashback: This was the exact point I made during my keynote at RampUp 2019 in NYC.  The gain in CPMs (win for network) from making the ad addressable (win for the marketer) could lead to higher revenue (win for network) even with a lower ad load (win for the consumer).

Quick math on the advertising model for Discovery+:
1) Ad minutes/hour – 5
2) 30s spots/hour – 10
3) Ad revenue/user/month – ≈ $4.00
4) CPM $ – ≈ $80
5) $/spot – $0.08
6) Spots/month – 50
7) The service hits revenue target at 5 hours/viewer/month

Video: Discovery CEO David Zaslav explains the future of streaming platforms