Q&A
Amazon Entertainment

Cable Giant Discovery Hires Amazon Veterans to Build E-Commerce and Tech

As entertainment companies Disney, WarnerMedia and NBCUniversal develop their own streaming services, much of their focus is on securing exclusive programming to lure in viewers. Peter Faricy, a former Amazon executive who last fall joined cable channel giant Discovery to run its expanding array of streaming services, thinks content isn’t enough. 

Discovery next year will partner with the BBC to launch a global streaming service focused on science, history and animals. And Mr. Faricy is focused on building technology so that its new service offers extras like e-commerce and interactive content.

 

The Takeaway
• Discovery recruiting 200 tech workers in Bellevue, Wash.
• Company sees future in e-commerce
• Top direct-to-consumer executives come from Amazon

“The media world in general hasn’t been very focused on thinking of themselves as technology companies,” Mr. Faricy said. “I am changing our strategy on that.“

Mr. Faricy, whose formal title is global head of Discovery’s direct-to-consumer business, is hiring a team of more than 200 people based in Bellevue, Washington, to build a technology platform for its streaming services. He recently tapped two former colleagues to help: Avi Saxena, former vice president of technology for Amazon Marketplace, is chief technology officer of the direct-to-consumer business. Tyler Whitworth, another former Amazon executive, was hired to run product. 

Discovery’s channels, including the original Discovery Channel along with Animal Planet, HGTV and Food Network, are known for nature programming and reality TV. But the company, which is controlled by veteran media mogul John Malone, also owns European sports networks. It currently operates five subscription-based streaming services: MotorTrend for auto enthusiasts in the United States; GOLFTV for golf fans abroad; Eurosport Player, an online sports streaming service in Europe that has rights to the Olympics; Dplay, a subscription-based entertainment streaming service available in Europe; and Global Cycling Network, which features cycling to viewers abroad. 

In addition to the global service launching next year, Discovery plans a subscription streaming service featuring HGTV stars Chip and Joanna Gaines of home improvement show “Fixer Upper,” which will accompany a new linear channel. Discovery is discussing other streaming services, but Mr. Faricy declined to disclose what they might be. Discovery executives told analysts on an earnings call earlier this year that they expect the company will spend $300 million to $400 million this year on developing the services. 

Media companies in the past have found it tough to hire engineers for technology projects —they typically prefer fast-growing tech firms. But Mr. Faricy says the growth of the big tech companies makes them “feel less entrepreneurial.” As a result, he says Discovery can attract recruits who are interested in something new. 

Mr. Faricy spent 13 years at Amazon, most of it building its marketplace business that lets outside merchants sell on Amazon’s platform. That background made him attractive to Discovery, whose CEO David Zaslav said earlier this year that he saw an opportunity to build an e-commerce business from the audiences watching Discovery’s channels—such as golf or cycling enthusiasts. “Those people want to spend.” 

Mr. Faricy recently spoke to The Information from Discovery’s offices in London, where he is spending the summer, about how he sees streaming services evolving and how companies like Discovery are managing the balance of selling streaming services directly to consumers while protecting their traditional business of distributing networks through cable and satellite companies. The excerpts that follow were edited for clarity and brevity.

The Information: It’s unusual to hear about tech executives going to traditional media. Why did you decide to leave Amazon for Discovery?

Peter Faricy: I loved my experience at Amazon. I had two big roles there. I led the music and movie business my first three years, and then Jeff [Bezos] asked me to take this business called the Marketplace Business. I had 35 people on my team to start. When I left to join Discovery, I had 22,000. We went from 25% of the units sold on Amazon to over 60%. Once you have that opportunity to reshape an industry and have that big impact, you’re anxious for the opportunity to have a run at something like that. After 13 years, I wanted to shape my own business and company and reshape a culture. It was a kind of a love story once I met with the senior team at Discovery and had a deep dive into the brands and the consumer engagement, and looking at the opportunity, I couldn’t wait to join and get started. 

How are you recruiting engineers and tech executives to a traditional media company? What’s your pitch about why it’s better than staying in tech?

This isn’t a criticism, but an observation. The fact is that a lot of the tech companies are very, very large, and there are pros and cons to being part of an entity that is very large. But one of the cons is that it begins to feel less entrepreneurial. You don’t feel like you can build stuff and innovate like you did when the company was smaller. So people are interested in getting in on the ground floor and building something. The other thing is when I talk about how we own the rights for the next three Olympics across Europe, people get excited. People know the brands and that helps. We just hired a very senior tech principal who had offers from Apple and Facebook and people asked how we got him. The honest answer is the guy loves the Food Network. It’s fun. 

How is Discovery going to compete with the likes of Disney, Netflix and Amazon when the average consumer only has so much to spend on these services?

Well, our strategy is a bit different than theirs. A lot of media companies are really focused on producing great content. We have within our family an enormous amount of content and shows that consumers love. What we are trying to do now is build products that will allow them to enjoy the areas they are passionate about. Amazon, Apple and Netflix have amazing scripted content, but we’re really the leader in nonscripted and nonfiction, whether it’s lifestyle, real life or sports. We are building our own software and that’s going to allow us to build products that we think are going to be significantly better than other participants who are competing in the same space.

David Zaslav, the CEO of Discovery, recently said he wanted the company to build “the Peloton of food.” What does that even mean?

One thing that has surprised me is how engaged users are with us online as well as on TV. For example, last year during the Thanksgiving timeframe over 80 million customers came to FoodNetwork.com. And on our free app, we give recipes and tutorials and advice on how to cook and enjoy food. We would love to build a product that we think could go beyond that.

Like something interactive with an e-commerce element?

I can’t comment on it yet, but I would say broadly that interactive and e-commerce are big ideas and we’ll probably do those things across many of our apps. It’s not just because we are trying to monetize this stuff, but based on consumer feedback. For example, with our PlaySports cycling network in the UK—they are the leading cycling network in the world. They have a brand called Global Cycling Network that, if you are a cycling enthusiast, it’s the must-participate-in community. They did a fun experiment where they bought 60,000 pairs of Global Cycling Network branded socks. It turns out that cycle enthusiasts get into socks. It’s like your currency for coolness. So when people go for a ride, they look at each other’s socks. Those socks sold out in a couple of days. So that, to us, is a signal from consumers. We are going to experiment a lot with things like that. 

Discovery has a lot of do-it-yourself programming—showing people how to renovate their houses, for instance—but how will you get people to pay for it when they can watch it on YouTube for free?

When I look at customer feedback, people enjoy sites where there are free videos available, but there are pros and cons. I think there's a huge gap between the very highly curated, highly tested and trusted videos that we have on our app and our website compared to what they can find for free. 

As you push more into subscription-based streaming offerings, how are you striking the balance of not cannibalizing your business with cable and satellite companies?

Most people seem to have pitted direct-to-consumer and the more traditional linear pay TV business as enemies. I am choosing not to view it that way and I feel like we’re actually making very good progress there. For example, when we rolled out GOLFTV in countries where streaming is low, we would partner with a traditional distributor. In countries where consumers view content via pay TV or free TV, we will build those kinds of relationships so we can serve those consumers. And as the world goes more toward broadband, there are a lot of opportunities for fun partnerships. I think there are a lot of things we can do. 

But in the U.S., the bulk of your revenue is from fees paid by cable and satellite operators. How do you get focus and resources when your success could hurt that business?

The data is startling. The fact is the younger demographics are not using traditional pay TV. Those are just facts. I think it’s important for all of us, including our distribution partners, to be doing what pleases the consumers.

Will you sell your services through platforms like Amazon Channels?

I really feel like one of the things that’s important as we roll out these new products is that they actually have a direct relationship with the consumer. The reason it’s so critical is we really want to be a leader in listening to consumers and building the most amazing products that they love. You can only do that if you have a direct relationship with the consumer.

We will work with big technology players in a way that is complementary to their business and really good for ours. But one of the requirements is that we really have to be in the position where we own the customer, we get the feedback directly and we’re able to pivot quickly and make products that they love.

Where do you see opportunities to get into new markets internationally?

I think India is an incredible opportunity. Many of the brands we have, starting with Discovery, are very popular in India. Obviously cricket is very big there. But I also think the country is just starting to get more into things like home, food and natural history, so there is huge potential there.

What is your view of ad-supported services? Is that something Discovery would consider getting into?

I think there is an opportunity to offer some content for free to allow consumers to try it. I am a big fan of Spotify, and they have done a great job of offering part of their product to be ad supported and then, if you’re like me, you can’t wait to become a subscriber. But we are really worried about how relevant the ads are, and we aren’t going to load these products up with pre-rolls or multiple spots in a row. Having said that, when people subscribe to the product, we believe it should be ad-free. We are very pleased to allow people to register with GOLFTV and get some content for free with ads. Many of them want to join and become a subscriber so both models work well.

Can you say more about the opportunities you see with integrations with voice?

I think there is an opportunity there. When I was at Amazon, we believed that Alexa could be the next big innovation. I think this is a big deal and one of the best reasons that I couldn’t be more pleased that we hired a CTO and are building this tech team. If you don’t own the  software and technology, it’s hard to build voice integration into streaming products. We believe building software with our own engineers will create a much better customer experience than hiring a third party. When you build your own tech teams you are able to hire top talent and innovate quickly based on customer feedback. Third parties are usually more expensive for lower quality work. In my opinion, voice integration is powerful for consumers and here to stay. With this in mind, we want to build this expertise within Discovery.


Jessica Toonkel is a New York-based reporter for The Information covering media and how the industry is being disrupted by technology. Before that, she spent seven years at Reuters covering a range of topics including media, mergers and acquisitions and financial services. She can be found on Twitter @jtoonkel.