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Why Discovery May Go Disney’s Way

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Discovery encouraged by newcomers

Discovery (DISCA) is considering joining Walt Disney (DIS) in launching its own standalone direct-to-consumer streaming video service, its CEO, David Zaslav, hinted when he spoke at a recent industry event. In April, Disney launched a streaming service called ESPN Plus that’s aimed at sports fans. The company is also on track to launch another streaming service aimed at a broader audience next year to take on Netflix (NFLX).

Discovery has been monitoring developments in the streaming service world and feels encouraged by newcomers to the market such as AT&T’s (T) WatchTV.

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Discovery adds channels through Scripps deal

Discovery’s streaming service would carry the company’s networks and would be priced in the range of $5–$8 per month. Disney’s ESPN Plus costs $4.99 per month, while WatchTV costs $15 per month. Netflix offers an entry-level plan that costs $7.99 per month.

Discovery acquired Scripps Networks and gained over a dozen networks in the process. Scripps gave Discovery channels that are popular with female viewers, thereby augmenting Discovery’s mostly male-focused in-house channels. This seems to give Discovery confidence that it can succeed with a standalone streaming service.

Discovery is not new to the streaming business. The company has teamed up with German broadcaster ProSieben to launch a video streaming platform in Germany. Amazon (AMZN) is a major player in Germany’s streaming market, controlling 26.8% of the subscription video-on-demand market in the country, followed by Netflix at 22.4%, according to Goldmedia Custom Research.

Revenues soared 63%

Discovery’s revenues rose 63% year-over-year to $2.9 billion in the second quarter, helped by the acquisition of Scripps. However, soaring costs cut its profits by 42.3% YoY to $216.0 million in the second quarter.

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