Discovery at 15
The Business Gazette
"If traditional media companies don't want to become extinct in the
Information Age, they will have to follow DCI's lead and recast
themselves as 'content-creators." -- John S. Hendricks DCI's
founder, chairman and chief executive
The area media giant is creating new content for the cyberspace age
by Chris Baker
During a season that has seen the Discovery Channel set a record for the
most-watched documentary in cable television history -- twice -- it's hard
to remember a time when so-called reality programming was considered
risky. But when Discovery debuted on June 17, 1985, few people in the
industry thought the all-documentary channel stood much chance of
survival. At the time, cable was dominated by entertainment-driven
networks, such as TBS and MTV.
Fifteen years later, the channel and its Bethesda-based parent company,
Discovery Communications Inc. (DCI), are stronger than ever.
DCI has added a host of other cable networks to its stable, including
Discovery Health Channel and Animal Planet, as well as publishing and
And though DCI has been making television history this season -- the
flagship Discovery Channel's springtime "Raising the Mammoth" and "Walking
With Dinosaurs" specials each attracted more than 10 million viewers,
making them the most-watched cable documentaries ever -- the company
believes its future lies in cyberspace.
This year, DCI formed a subsidiary, Discovery.com Inc., to manage the Web
sites of its cable networks and offer online consumer information and
DCI says the move onto the Web puts the company at the forefront of what
the television and Internet industries call "convergence," the eventual
merger of television sets and personal computers.
"We view our core business as content creation. We are positioning
ourselves to be a provider of content, even as the technology of content
delivery evolves before us," Judith A. McHale, DCI's president and chief
operating officer, said.
Indeed, DCI isn't resting on its laurels in its 15th year. McHale said the
company is too concerned about the uncertain future it faces.
"This is an exciting time to be in this business, but it's also a very
challenging time," she said.
In a speech to Washington, D.C.-area telecommunications executives last
year, DCI's founder, chairman and chief executive, John S. Hendricks,
compared cable television in the age of the Internet to the railroad
companies during the automobile revolution of the 20th century.
The rail companies went under because they mistakenly thought they were
simply in the rail business, Hendricks said.
"What a different future those companies might have had if they had only
seen themselves as being in the business of improving the mobility of
customers," he said.
If traditional media companies don't want to become extinct in the
Information Age, they will have to follow DCI's lead and recast themselves
as "content-creators," Hendricks said.
Although DCI isn't the first big media company to stake out space in
cyberspace, observers say the loyalty the Discovery brand inspires gives
the company an advantage over rivals.
Consumer surveys frequently place the Discovery name among the most
trusted in the public eye, along with Crayola, Hallmark and Kodak.
DCI hopes to put that brand loyalty to work for it on the Web.
The company wants to compete with Yahoo! and other so-called portal sites
with "Discovery Web Express," which allows Internet users to receive
customized information, such as local weather and news and stock quotes.
"Consumers trust the Discovery brand when it comes to quality television.
We believe they will also entrust us to be their guide to the Internet,"
Eventually, DCI envisions visitors to Discovery.com being able to view
online some of the programming now seen on the company's cable channels.
"The broadband technology [to offer television programs on the Internet]
isn't there yet, but it's evolving fast," McHale said.
Until then, DCI is using the Web to drive viewers to its networks.
For example, the company heavily promoted the Discovery Channel's "Raising
the Mammoth" and "Walking With Dinosaurs" specials on its Web sites.
DCI has also developed a package of "multiplatform convergence content
sponsorships" that allows advertisers to attach their names to promos for
future big-ticket specials. In addition to getting a "brought to you by"
credit during the ads, the sponsor also gets tile and banner ads on the
Discovery Web sites.
DCI hopes to sell 30 convergence ad packages over the next year. The
sponsorships, priced between $500,000 and $1 million, have generated lots
of buzz among advertisers, who are increasingly turning to the Internet to
McHale said the success of the mammoth and dinosaur specials demonstrates
DCI can use its Internet and retail arms to help promote advertisers.
"This is an increasingly fragmented world. Our ability to reach consumers
extends across several platforms, and that's becoming very valuable,"
Doug Seay, a senior vice president at San Francisco-based advertising
giant Publicis & Hal Riney, said DCI's convergence ad packages are being
watched closely by the industry.
"Discovery is an established brand in television, and it's becoming an
established brand on the Internet. They're playing in two spaces that are
about to become one," Seay said.
Bethesda-based media analyst Gary H. Arlen said DCI faces plenty of
challenges in making its Internet enterprise successful.
For example, when The New York Times Co. announced it was spinning off its
online media entity into a tracking stock this year, it angered longtime
employees by allowing only workers at its online company to participate in
the lucrative public offering.
DCI -- which is privately held -- will face a similar decision if it
decides to take Discovery.com public, Arlen said.
"These are the kinds of things traditional media entities are dealing with
as they separate their online components from their core business," Arlen
New competitor, familiar name
In addition to pioneering convergence, DCI also finds itself facing a new
competitor with a familiar name.
The National Geographic Society, the not-for-profit organization that has
been publishing books and magazines since 1888, is working to reinvent
itself in the DCI mold.
Like DCI, National Geographic now produces Imax movies and has a
sophisticated Web site. It also runs two stores in the District, and it
has signed a deal with The Museum Co. to carry branded National Geographic
merchandise in the chain's 100 retail outlets.
The society also continues to publish its flagship magazine and books,
while also producing a radio program for National Public Radio.
But the biggest encroachment into DCI's territory will come next year,
when the society says it will launch the National Geographic Channel, a
cable network expected to offer the same kind of adventure and wild life
programming that has been DCI's hallmark.
The society already produces "National Geographic Explorer" for CNBC, a
weekly documentary series now in its 13th season. Its occasional specials
on NBC also generate high ratings.
McHale dismisses the suggestion of competition between DCI and the
society, saying audiences will make room for both.
"If you look at the Discovery programming, it tends to be very
interactive. The National Geographic programming is much more passive ...
Both feature beautiful photography, but Discovery [programming] invites
you to become engaged," she said.