Discovery ended 2021 with 22 million DTC subscribers

Discovery reported financial results for the quarter and year ended December 31, 2021, and revealed that it ended last year with 22 million direct-to-consumer subscribers, an increase of 2 million subscribers since the end of the third quarter, with the vast majority being from Discovery+.

At the same time, the company said that it successfully transitioned the entirety of its Discovery+ subscriber base across Europe onto the same technology platform as the United States, which will deliver a more personalized content and viewing experience. Now, the group expects to drive better consumer engagement and lower churn, as well as enabling an ad-lite advertising offering in key markets, beginning in March in the UK.

Financially speaking, Q4 total revenues of $3,187 million increased 10%, or increased 11% ex-FX, compared to the prior year quarter. US advertising revenues increased 5% and distribution revenues increased 17%; while international advertising revenues increased 10%, or 12% ex-FX, and distribution revenues increased 2%, or 5% ex-FX.

US Networks revenues increased 14% compared to the prior year quarter to $2,025 million. Moreover, advertising revenue increased 5% “primarily due to higher pricing, the continued monetization of content offerings on next generation platforms, and higher inventory, partially offset by secular declines in the pay-TV ecosystem and lower overall ratings,”  the company said. Distribution revenue increased 17% primarily driven by the growth of Discovery+ and increases in contractual affiliate rates, partially offset by a decline in linear subscribers.

"2021 was by all measures an exceptional year for our company, in which we achieved significant operational, financial, and strategic objectives. We grew our global DTC paying subscribers to 22 million, a tailwind for our strong distribution revenue growth of 11%, while global advertising revenues grew 10% due to continued strength in our key markets and share gains,"  said David Zaslav, President and Chief Executive Officer of Discovery.

“Additionally, we ended the year with nearly $4 billion of cash on hand and generated robust cash flows, supporting our ability to invest in growth initiatives. Further, the successful recent broadcast of our second Winter Olympic Games across Europe, on the heels of our first broadcast of the Summer Olympic Games, underscores one of our key differentiators: in-language and locally relevant content. All of which position us well to take advantage of the remarkable opportunities ahead for Warner Bros. Discovery, which we believe will be among the world's most dynamic media companies,”  Zaslav added.

●  WHAT’S NEXT FOR DISCOVERY?

As Discovery reported what could be its final earnings before officially becoming Warner Bros Discovery, Parrot Analytics has assessed where the new company will stand in the race for streaming and entertainment supremacy. The combined entity is projected to start out in second place in corporate demand share, leapfrogging Paramount and sitting within striking distance of market leader Disney in this key metric that serves as a proxy for the longterm viability of media companies as they eventually bring their full catalogs onto a unified streaming platform or bundle.

In terms of SVOD, the crown jewel of the joint company will clearly be HBO Max, which saw massive growth in 2021. HBO Max has maintained this momentum in early 2022, with breakout hits such as “Peacemaker” and “Euphoria” becoming mainstays in the United States and global top ten TV demand charts since January.

HBO Max is a very well rounded streaming service which appeals to numerous key genres, especially dramas, comedies, and adult animation. Discovery+, on the other hand, is more of a one trick pony that is all in on reality and documentary series. That said, Discovery+’s one trick is in the major category that HBO Max is lacking - unscripted content - and which rival Netflix has made significant inroads in over the last two years.

Discovery+'s abundance of highly in-demand unscripted programming - from several of the most watched cable networks in the United States - will service an audience that HBO Max has yet to tap. It will provide the Warner Bros Discovery ecosystem with a whole new audience without HBO/HBO Max having to reinvent the wheel with untested unscripted content of its own.

Whether Warner Bros Discovery decides to combine Discovery+ into HBO Max, or bundle the services, Discovery and WarnerMedia will combine to create a formidable offering that will rival Netflix as the top streaming platform, and Disney at the top overall media conglomerate in the United States, Parrot concluded.