Businessmodel of Discovery Communications

Customer Segments

Discovery Communications serves a range of customers, principally distributing content for consumption by the general consumer market. The Company directly serves a range of content distributors and network providers, to which it sells the rights to broadcast its network content. These customers include:

• Cable service operators, such as Comcast and Time Warner Cable;
• DTH satellite service providers, such as DirecTV;
• Telecommunications companies, such as Verizon and AT&T; and
• On-demand and streaming platforms, such as Netflix and Hulu. Discovery Communications also serves advertising agencies, brand marketers and commercial entities to which it provides advertising solutions.

Discovery Communications distributes customised content to customers in the US, and across more than 220 other countries and territories in over 40 languages. The US remains the Company’s largest market.

Value Propositions

Discovery Communications provides value to its customers in the following ways:

• Its production of high-quality original content, with the Company developing its own programming and intellectual properties;
• The breadth of its content, with the Company providing a range of content to suit different audiences, including kids programming, nature documentaries, sports broadcasts, entertainment shows, and history documentaries;
• Its international reach, with the Company providing content to customers across more than 220 countries in various languages, including across the Americas, Asia Pacific, and Europe; and
• Its large audience for advertisers and brand marketers, with the Company attracting more than 3 billion cumulative viewers worldwide to which advertisers are able to promote their products. ### Channels

Discovery Communications operates a corporate website at www.corporate.discovery.com, through which its provides information on its networks, programming and distribution network. The Company also operates an online streaming service named Discovery Go, which can be accessed via the Company’s consumer website at www.discovery.com.

Discovery Communications operates more than 35 television network channels, including its flagship Discovery Channel, as well as TLC, Animal Planet, Eurosport, Discovery Kids, DMAX, Velocity, and Discovery Life. These channels are available to consumers through a range of domestic and international service providers.

Discovery Channels also operates its own in-house sales teams that deal with the Company’s commercial customers, including distributors and advertisers. The Company has a network of offices across the US, as well as 68 locations outside of the US, including in the UK, France, Denmark, Italy, Singapore and Poland.

Customer Relationships

Discovery Communications provides programming to consumers on a self-service basis through its online streaming services, which enables customers to register their account and view content without interacting with members of the Discovery Communications sales teams. Customers can also purchase merchandise on a self-service basis through the Company’s online store.

Commercial customers must consult directly with the Company’s in-house sales teams, agreeing multi-year distribution and advertising deals. The Company has long-standing relationships with a range of leading content distributors. The Discovery Communications consumer website provides a range of information for customer on programming schedules and company developments.

Customers can contact the Company over the phone and online, and can interact directly with Company through its social media accounts with Facebook, Twitter, Instagram, YouTube, and LinkedIn.

Key Activities

Discovery Communications is a global media company. It provides programming content across multiple distribution platforms, including pay-television, free-to-air and broadcast television, websites, on-demand and streaming services, and content licensing agreements.

It operates through two business segments covering the Company’s domestic US operations and its international operations. Discovery Communications distributes content across more than 220 countries worldwide, including its home market of the US, as well as across Asia Pacific, Europe and Latin America. The Company’s television brands, include Discovery Channel, TLC, Animal Planet, Investigation Discovery, Science and Velocity.

Key Partners

Discovery Communications collaborates with various companies as part of its operational activities. This includes:

• Licensing and Distribution Partners, including distributors and service providers that assist in distributing the Company’s content across multiple jurisdictions worldwide;
• Production Partners, that assist the Company in producing content; and
• Strategic and Alliance Partners, with which the Company collaborates on joint projects and shares resources. Discovery Communications has a partnership with LG Electronics to showcase the company’s line of OLED television sets, a tie-up with VolunteerMatch to drive awareness for volunteer projects, and an agreement with TubeMogul to automate private inventory management on Discovery GO.

Key Resources

Discovery Communications’s key resources are its intellectual properties, its production assets, its proprietary networks and distribution channels, its partnerships, and its personnel.

The Company’s intellectual property assets include copyrights in television content, trademarks in brands, names and logos, websites, and licenses of intellectual property rights from third parties.

Cost Structure

Discovery Communications incurs costs in relation to the production of its original content, the management of its distribution channels, the operation of its programming networks, the management of its partnerships, and the retention of its personnel.

The Company accrues substantial general and administrative costs – including the payment of salaries and benefits to its workforce of more than 7,000 employees, and the payment of rental and utility fees across its network of offices – amounting in 2015 to $1.67 billion.

Revenue Streams

Discovery Communications generates revenue through the production and distribution of original programming content. Its revenue streams include:

• Revenue derived from fees charged to distributors for first-run content;
• Revenue derived from licensing fees charged to digital distributors; and
• Revenue derived from the sale of advertising solutions to brand market and commercial entities. In 2015 Discovery Communications generated annual revenue of $6.39 billion, up slightly on the $6.56 billion recorded in 2014. The Company’s revenue was split evenly between its two operating segments, with both US Networks and International Networks generating around $3.1 billion each. Revenue was similarly split evenly between distribution and advertising, with both recording revenue for the year of around $3 billion.