As technology constantly advances, more innovative and integrated media entertainment platforms are created, allowing viewers to consume programming like never before. From rental kiosks outside of grocery stores to streaming and video-on-demand services inside the home, from tablets to smartphones to gaming consoles, from big box retailers to digital storefronts, viewers now have unparalleled access to vast amounts of programming. With all of the improvements made with regard to viewer access over the years, there has been only one constant, the demand for popular content.
Every media company will eventually live or die by the content that it creates. To quote Bill Gates, circa 1996, “Content is king.” There simply is no substitute for popular subject matter in the media world and since the demand for it will never diminish, it is the primary aspect by which we as investors must analyze all media stocks, particularly with regards to growth stocks as it is a company’s ability to consistently create new and popular content that is of utmost importance.
A natural at content creation
Discovery Communications Inc. (NASDAQ:DISCA) is a natural at creating content quickly, efficiently and at lower costs than many media companies, particularly those that focus on expensive, scripted drama programs like AMC Networks Inc (NASDAQ:AMCX) does. Additionally, since the company offers content that has broad ranging appeal, Discovery’s shows are better suited for mass global consumption, as they can be repackaged for international audiences with limited difficulty.
The company basically has a lock on the documentary-style nonfiction television show. When viewers want to watch programming about animals they will most likely tune in to Discovery Communications Inc. (NASDAQ:DISCA)’s Animal Planet, where else can they go besides Nat Geo Wild? Similarly, when viewers want to watch programming about World War II they will turn to Discovery’s Military Channel. The same goes for outdoor survival, health/fitness and true crime shows; the offerings are extremely limited outside Discovery’s own programming.
The company’s channel lineup has consistently provided viewers with a broad spectrum of informative and entertaining shows, so much so that the networks’ themselves have become synonymous with phrases like “nature channel,” “health channel” and “animal channel,” which is evidence of powerful brand-name recognition. Do a Google search for any of these phrases and see what pops up first (one of Discovery’s channels is always the first or second hit). This is what makes Discovery Communications Inc. (NASDAQ:DISCA) such an intriguing company; it has very distinct brand-name recognition and very few competitors, the essence of a moat.
However, Discovery Communications Inc. (NASDAQ:DISCA)’s channel lineup is no longer just about nature shows and informative documentaries. The company’s increasingly diverse portfolio of networks, including Discovery Channel, Animal Planet and The Learning Channel, now offers television shows for every kind of viewer. From popular documentary style nonfiction shows like Deadliest Catch and Gold Rush to more flamboyant reality series like Here Comes Honey Boo Boo and Extreme Cougar Wife and everything in between, management at Discovery has significantly broadened the company’s network appeal over the years.
Discovery Communications Inc. (NASDAQ:DISCA)’s programming success doesn’t end with the company’s attempts to broaden its content offerings. Success also comes from management’s ability to continuously create new and compelling content that has the rare ability to change to the tune of the viewer at a moment’s notice. Take for instance the company’s popular show Gold Rush; not only has management successfully expanded the show into three lengthy seasons, they also have created a spinoff show called Gold Rush: South America with half of the original, popular cast returning to mine for gold in various countries outside The United States. Additionally, to further capitalize on the success of Gold Rush, Discovery Channel created three entirely new but similarly themed shows called Bering Sea Gold, Under The Ice and the currently airing Jungle Gold.
