Discovery CEO Hopes Industry Leaves Nielsen ‘in the Dust’ After Ratings Blunders

As CEO David Zaslav eyes the completion of the mega-merger between his Discovery Inc. and WarnerMedia, which remains on track for a mid-2022 close, there won’t be a lot of love for the measurement firm Nielsen at the newly combined company. In a call with investors Tuesday morning, the television executive railed on the measurement firm, which is facing intense industry pressure after admitting that it accidentally under-counted television audience measurement in the early months of the Covid-19 pandemic. “It’s massively disappointing that Nielsen can’t get its act together, and the answer is we’ve lost money. Everyone’s lost money,” Zaslav told investors Tuesday morning while discussing Discovery's quarterly earnings. “You’re dealing with a very antiquated delivery system. We’ve all learned how to get along with it, we do it by augmenting it with our own data. But recently they’ve just been wrong.” Which is why Zaslav hopes to move away from Nielsen entirely. “I don’t have a lot of hope for Nielsen,” he said. “Somehow as an industry we’re going to have to work our way out of it from a technology perspective and just leave them in the dust, because they just can’t get it together. It’s a shame.” What WarnerMedia-Discovery’s Streaming-Centric Merger Means For HBO Max and Discovery+ The scathing remarks, which come less than two weeks after the Video Advertising Bureau industry group pressured the nonprofit Media Rating Council to strip Nielsen’s measurement accreditation, come as Discovery continues to eye a mid-2022 completion of the mega-merger between AT&T-owned WarnerMedia and Discovery into a new entity, Warner Bros. Discovery. Zaslav, who has been tapped to serve as CEO of the new entity upon the deal’s close, said that merger continues to be on track, and that he is hopeful to clear regulatory hurdles to get the deal done even sooner. “There’s broad support for this transaction. We haven’t heard any pushback. We haven’t seen any public pushback,” said Zaslav, who told investors he was in Washington, D.C. a week ago to meet with regulators. “This becomes a very strong company for consumers, and a more streaming business. Right now, it feels to us on every level like we’ve seen green lights. We’re not seeing any yellow lights or red lights. Having said that, we’re not in control of the timing.” Becoming a 'formidable' streaming force That merger is set to bring together a wide swath of direct-to-consumer streaming subscribers along with WarnerMedia and Discovery’s linear assets. While Discovery doesn’t break out Discovery+ subscribers directly, instead lumping those subscribers in with various regional direct-to-consumer services, the company ended its second quarter with 17 million direct-to-consumer subscribers, six million more than the 11 million total streaming accounts it reported last quarter. (The company generated $400 million from those direct-to-consumer relationships, it reported—a 130% spike compared to a year ago, when Discovery+ was not yet on the market. ) As of Aug. 3, Zaslav said, Discovery’s various direct-to-consumer businesses counted 18 million direct-to-consumers subscribers, driven primarily by Discovery+ growth. Combine that with soon-to-be sister streamers HBO and HBO Max, which counted a combined 47 million subscribers in the U.S. at the end of its second quarter, and executives say they have the chance to take a big chunk of the streaming market both in the U.S. and internationally. “People are going to take a look at what we have, what [AT&T CEO] John Stankey put together, together with what we have, and it’s really going to be formidable,” Zaslav said. “Disney and Netflix have gotten across the lake, and we think that this will be the third global streaming service— successful, sustainable. That's our mission.” Zaslav also took the change to send a shot across the bow at some of the company’s biggest competitors, who are also using their streaming inroads as a way to nurture other businesses other than streaming. The Warner Bros logo that Discovery will soon join forces with “stands for great storytelling,” Zaslav said, “and we are maybe the only company that has the ability to focus only on that one thing. We're not in the phone business when this deal closes. We're not in the retail business. We're not in the cloud business, we’re not in the broadband cable business.” More than 20% CPM hikes in best-ever upfront A big chunk of the combined business, many details of which remain under wraps due to the regulatory hurdles that remain, will be the growing advertising opportunities presented by ad-light streaming products, which are helping drive higher revenues while offering advertisers the incremental reach they are increasingly seeking out. Executives underscored the success of Discovery’s most recent upfronts, and for the first time, the company shared some additional details about the extent of its success. Overall, the company was able to raise CPMs by more than 20%, Zaslav said, and Discovery’s three-year-old Discovery Premiere offering, which allows brands to advertise exclusively in first-run episodes among Discovery’s 30 most-watched shows, is of particular interest to advertisers, with more than 200 clients are now buying inventory through Discovery Premiere. CPMs on Discovery Premiere are priced in the 40-dollar range per CPM, lower enough to be attractive to advertisers compared to broadcast’s average in the 60-dollar range, but considerably higher than the 20-dollar range around which much of Discovery’s inventory had been previously priced. Total advertising revenues in the U.S. increased 12% to $1.97 billion, Discovery reported. “Advertisers continue to look for incremental reach with linear, and with roughly half of the Discovery base non-cable households, the platform is hugely attractive to buyers,” Zaslav said. “The upfront was the best I’ve seen in my career.” Discovery+ is driving much of that growth. Overall, more than 800 advertisers have bought inventory on Discovery+, more than four times the company had targeted for the end of the third quarter, chief financial officer Gunnar Wiedenfels said. The company is also using its streaming growth to spread the wealth across its suite of platforms. More than 90% of all clients that bought inventory on Discovery+ also bought inventory across its Discovery TV Everywhere platforms, which include standalone, cable-authenticated apps for a suite of brands like DIY Network, HGTV, Food Network and Travel Channel. Discovery+’s ad-supported tier brings in about $6 in advertising revenue alone per subscriber with three minutes of ads per hour of watching in the U.S., which is informing the company’s international strategy. “We're looking at ad-lite as a meaningful opportunity to go into markets at a lower price, get more scale and be able to pick up actually more money,” Zaslav said. “Doing that requires more engineering, more code. But we want to get it right.”