Discovery Inc Cuts into the Bone

Discovery Inc. is in the midst of laying off hundreds of employees.

A radical headcount reduction is central to Discovery’s current campaign to eliminate $US hundreds of millions in costs in 2020.

I hear that the layoffs and other cuts affect all of the company’s activities, from corporate to programming, and from new hires to veterans.

Financial Challenges

  • Discovery’s cuts follow the shift by viewers, and the advertisers who target them, to online platforms.
  • Subscription revenues are also in decline, impacted by cord-cutters and cord-nevers.
  • Senior execs are motivated by another factor:
  • These deep cost savings shape Discovery Inc’s financials for the company’s future sale.
  • Discovery lacks the scale and business model to compete with the new video giants led by Netflix, Google/YouTube, Disney, Apple, and the others.
  • Selling the company must be the focus of Discovery’s senior executive team.

Programming

  • More than $100 million is targeted for cuts to programs.
  • These savings are coming out of the budgets for Discovery’s legacy channels and the Lifestyle networks formerly operated by Scripps.
  • The production community that serves Discovery’s networks is likely to experience slower deal-making, fewer episodes per series, deferred deliveries and premieres, and cancellations of planned shows.

Peter’s Takeaways

  • These cuts to staff and programming are so deep that the remaining teams will struggle to dig out from the paralyzing fear that envelops the company this month.
  • Discovery’s programming execs will have to fight to get the internal green lights for the fresh programming solutions that will attract viewers and bolster their great but diminished brands.
  • According to my back-of-envelope estimates, Discovery still spends upwards of $1 billion / year on documentary and unscripted programs. That’s far, far more than Netflix and the streamers.
  • Producers must grasp the reality of Discovery’s tough situation, while remembering that the Cab/Sat network category as a whole will remain a major buyer of programs.