Discovery Inc. is reassessing some production budgets after the pay-TV network operator managed to slash costs for content shot from home during the coronavirus pandemic.
The New York-based company quickly shifted to producing television shows from its cast members’ homes after widespread lockdown orders to curb the spread of the novel coronavirus took effect in March.
Discovery, which spent $3.26 billion on content last year, is saving $300,000 on average for every hour of content shot from home, said Gunnar Wiedenfels, the company’s chief financial officer.
“We have been creating some very successful content with very scrappy equipment,” he said. “It felt the more real and authentic the content became during the crisis, the better it worked with our audience.”
Discovery sent cameras, iPhones, tripods and other equipment to presenters and other on-air staff through the mail and had them record content for the network’s home, food and do-it-yourself programs, including TLC, HGTV, Food Network and DIY. Some used their own iPhones or GoPro cameras.
The company, which in 2018 closed an $11.9 billion deal to acquire Scripps Networks Interactive Inc., is reviewing the cost of future production budgets as coronavirus-related restrictions ease across the country. It also is reassessing its real-estate footprint.
“I absolutely know that the learnings from these covid-productions provide a different set of tools in our production management’s toolbox,” Mr. Wiedenfels said, adding that there could be smaller budgets for some productions.
Some of the cost savings could help offset projected revenue shortfalls. Advertising revenues were largely flat at around $1.4 billion during the first quarter compared with the prior-year period. But Mr. Wiedenfels said Discovery expects declines in the coming quarters.
Media companies and television networks are trying to bring down costs, said Kutgun Maral, a senior analyst at investment bank RBC Capital Markets. “Across the board, you see [media companies] looking to proactively evaluate and improve their cost strategy,” Mr. Maral said.
But Discovery could reduce its costs ahead of peers, as it doesn’t have longstanding sports-rights contracts and relies less on scripted content than other networks, he said.
Discovery has its own internal production entities but also uses a network of external content providers. The network isn’t looking to work less with production companies, but is looking for ways to bring down costs, Mr. Wiedenfels said.
Discovery has it easier than other content companies, said Neil Macker, a senior equity analyst at research firm Morningstar Research Services LLC. “Discovery is unique in that way that a lot of their content is based around the home and garden,” Mr. Macker said. “A lot of these [programs] can be shot in their employees’ gardens or their houses.”
The company also is benefiting from some changes it made as part of its integration of Scripps. For example, it introduced a standard budget template for all production companies, which Mr. Wiedenfels says gives the company more insight into costs and potential savings. “We have found a way to have a much more data- and fact-driven interaction with production companies,” he said.
An investment in new file-sharing and cloud-based streaming technology helped when its broadcast hub in Stirling, Va., closed for deep cleaning because of a suspected case of Covid-19. “We played out 250 feeds through this cloud-based setup,” Mr. Wiedenfels said.
The costs that Discovery and other companies are able to cut will likely stay, RBC’s Mr. Maral said. “Media companies will continue to face cyclical pressures even beyond the pandemic,” he said, pointing to issues such as “cord-cutting”—the trend of viewers canceling their cable and satellite TV subscriptions—which has eaten into revenues and margins.
Write to Nina Trentmann at [email protected]
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