In very broad terms, there are two types of corporate takeover in the sports media industry. The first type, increasingly popular as the numbers in sport continue their upward trajectory, is the private equity buy. The financiers come in, take a position, and aim to wait it out while their investment grows. Buy, flip, sell. The formula is the same even if the level of continued investment and the growth strategy (or asset-strip) can vary.
There are both positives and negatives associated with this type of takeover. On the plus side, management teams are often left in place, sometimes even with a higher level of financial wherewithal, and given a mandate of ‘business as usual’, as long as there’s growth. The negatives, however, can eke their way out in the communication strategy; it becomes difficult to see who is in charge, who sets the strategy, especially when private equity firms are so reticent about putting a figurehead forward – and in the fact that, with a private equity firm at the top, the business is essentially always for sale. Both Formula One, owned by CVC, and Infront Sports & Media, owned by Bridgepoint Capital, are in this boat.
The second type of takeover is the media-on-media buyout, where company A buys company B in order to grow its own overall business, rather than to sell it on later. There is more scope for large-scale change in this type of takeover, likewise more chance of insecurities and job losses. Nevertheless, they are far more interesting. Two such transactions went through to bridge 2013 to 2014: first, in December, WME came out on top in the bidding for IMG. Then, in January, Discovery Communications announced it would acquire a controlling stake in Eurosport. Fortunately for industry observers, neither acquisition was carried out under the cloak of corporate anonymity. And, judging by the moves made by each business since, the strong personalities in key leadership positions, that cloak will stay in the cupboard at both.
A week before Discovery announced plans to take a 51 per cent stake in Eurosport, adding 31 per cent to the 20 per cent stake it initially bought from the TF1 Group in December 2012 and valuing the business at US$1.2 billion, it appointed JB Perrette as the president of its international business. And, on paper at least, there couldn’t be a better executive to usher in a new era for Eurosport, a unique sports broadcast company in more ways than one.
“Any new owner is going to walk into a house, and it’s not that the house is ugly or bad, but they’re going to have a view on things that they want to redesign.”
Eurosport, a pan-European broadcaster with a strong French core, has carved a niche for itself where no niche existed before. 25 years old in 2014, it is one of the longest-surviving European satellite television networks. Gone are the days when it was the home of truck racing and wood-chopping, but its solid rights portfolio is grounded in a look, feel and atmosphere that would be familiar to those that were watching Eurosport in the early days.
Perrette, on the other hand, is a thoroughly modern media executive. He joined Discovery in 2011 having made a name for himself over an 11-year career at NBC. His final role at the Peacock – president, digital and affiliate distribution, and content distribution strategy – gives an indication of the skills he will be required to use in his current position. But it was his sheer versatility – combining the financial acumen that served him in several CFO positions at NBC with a cutting edge understanding of the evolving digital media landscape – that prompted the Discovery hierarchy to promote him from the role of chief digital officer to one of the group’s most challenging roles.
“JB has it all,” said Discovery Communications president David Zaslav upon his appointment, “strong strategic vision, operational expertise and exceptional team-building skills.” A French speaker (JB stands for ‘Jean-Briac’, the ‘Jean’ after his father, and the ‘Briac’ after the town in France his family are from), Perrette has an easygoing manner about him that belies the fact he has spent his career succeeding in the corporate maelstrom of American media.
Now based in Discovery’s London offices – a brief train journey under the channel from Eurosport’s Paris headquarters – Perrette also feels like he’s having something of a homecoming. “I started my career 20 years ago here in London,” he says in an interview in mid-September, referring to a period he spent first with Credit Suisse and then on General Electric’s leadership development programme in London. “And now I’m back and it’s terrific being here. I was literally one of a handful of international employees in our New York office and here I’m with one of our biggest and most important regions in the world, and much closer to our operating businesses across Europe.”
Discovery has a presence in 220 countries and London is something of a hub, at least in communication terms. Perrette, who oversees all Discovery's international hubs, including Miami for Latin America and Singapore for Asia pacific, is already keeping odd hours to fit in conference calls hither and thither, but that too he is prepared for, this time by the fact that his two young children have taught him how to operate effectively on very little sleep.
The only thing he lacks is sports industry nous, but for that he is happy to rely on his new European colleagues. Fresh eyes, a mindset and a corporate strategy uninhibited by the habits and preconceptions that can build up within a close industry, should serve to reinvigorate Eurosport.
“Any new owner is going to walk into a house, and it’s not that the house is ugly or bad, but they’re going to have a view on things that they want to redesign,” says Perrette of the interior decoration project he is currently engaged on with Eurosport. “We all have our own tastes and our own views.”
Perrette and the team at Eurosport, particularly chief executive Jean-Thierry Augustin, are in contact on a near daily basis. Almost every other week there is a face-to-face meeting either in Paris or London. The two companies, Perrette says, “have a shared international history”, Discovery having been in Europe for as long as Eurosport has existed, and while Eurosport is a priority for Perrette, it is by no means the only thing on his plate. There are some 900 people in Discovery’s London offices. Alongside the UK operation and wider Western Europe division are an international technical operations unit, a sizeable chunk of the Central European and Eastern Europe and Middle East and Africa teams, though officially they’re headquartered in Discovery’s Warsaw offices, the Nordics business, and a handful of corporate functions.
The impressive control room in the London offices – adjoined to the reception via a panelled glass wall – gives an indication of the scale of the wider Discovery business. Output on 101 channels – in 27 languages – flashes across the breadth of the console. What started as simply the Discovery Channel in 1985 has grown into a media empire that had revenues of US$2.95 billion in 2013. Discovery-owned businesses TLC, Animal Planet, and the Science Channel are all significant businesses in their own right and the Discovery business now claims to be the leading provider of non-fiction programming worldwide. In 2013 alone, the group completed the acquisition and integration of SBS Nordics, launched TLC in the UK, grew ratings by 25 per cent internationally and topped it off with the Eurosport acquisition.
“I’m spending a lot of time on Eurosport initially,” explains Perrette. “Partly because there’s an ongoing conversation about how we bring the two organisations together most effectively, but obviously sports is a new genre of content for us.”
Perrette is happy to accept that, to the outsider, the fit might not seem like a natural one, but the strategy behind the initial investment is sound. “A lot of people scratch their heads when they think of Discovery getting into sports, but as I like to say, in many ways sports is maybe the most epic of non-fiction and given the drama, the emotion, the passion that exists for sports content, it’s one far end of the spectrum of non-fiction content so programmatically we don’t look at it that differently,” he says. “It’s adrenaline, it’s action, it’s even aspirational and a lot of our core bread and butter has a lot of those same qualities. The amount of kids that watch sport and go, ‘I want to be….’. A lot of our shows inspire that same thing: ‘I’d like to be out on the Bering Sea just fishing for crab’, and then they have a reality check and realise they don’t want to be on the Bering Sea, they just want to be sitting on the couch watching it!”
"Continue to invest in content, strengthen our brands, and by doing that, grow our audience share - that’s our north star."
Programmatic synergies aside, there are more pressing reasons for a broadcast company such as Discovery to get into sport, which remains one of the final bastions of appointment-to-view programming in the television industry. “The world is changing,” says Perrette. “Viewership is changing and non-linear behaviour is obviously becoming more and more important. In that vein, diversifying our portfolio of content genres we think is important. We haven’t historically played in the sports category in a meaningful way, but it’s an incredibly important content genre today. It’s must-have content which we think has great benefits to our portfolio of channels where we’re trying to drive promotion, audience awareness of content in a timely fashion, provide timely vehicles for advertising partners and provide real value to our distribution partners, who are obviously looking to grow their subscriber bases.”
With Perrette and Michelle Russo, a former media advisor to Al Gore and now Discovery’s executive vice president for global communications, installed in London as of July, just over month after the deal ultimately closed on 30th May, the nuts and bolts of assimilating the Eurosport business can begin in earnest. A process of consolidation is already underway across certain business areas and geographic regions. “We’ve been reinforcing the links between some of our subsidiaries in territories like Italy, Spain, Poland and in Scandinavia,” explains Augustin. “And we’ve been working for one year already on a joint sales organisation.”
The increased channel options have already proved beneficial for the group. When Rafael Nadal stormed to another French Open final this year, Spanish regulation dictated that exclusive Spanish pay-TV broadcaster Eurosport had to license the semi-finals and final to a free-to-air broadcaster. After striking a ‘deal’ with new sister station Discovery Max, the Eurosport/Discovery axis took a 20 per cent share of Spanish TV audiences for the final.
“It’s a marathon, not a sprint,” says Perrette of a process that will see the two organisations run through their business departments to ensure efficient relationships with distribution partners or sales representatives in various market. “The sequencing and timing is being phased in as soon as it can be, but it’s country by country and these things can’t take place all at the same time,” says Perrette. “But generally the concept that is effective today is that we want to go to market as a portfolio.”
And while the dialogue between Eurosport and Perrette has been near-constant and evolving, Discovery’s top-line strategy for its new European acquisition is unambiguous.
“We have one general priority,” explains Perrette. “We want to grow our audience share.” Historically, Discovery has been able to achieve that ongoing goal through a variety of methods, most of which can be categorised as ‘investing in content’.
Discovery believes that the programming across its portfolio caters to passionate audiences of “super-fans”. The various content and programming divisions across Discovery focus on “super-serving” these super-fans. “We used to have four per cent share in the US, we now have an 11 per cent share of pay-TV,” says Perrette. “And that’s just by re-tooling, re-jiggering, re-investing in content in more and more ways to drive audience share. We had in the second quarter of this year our biggest ever ratings quarter for the international businesses. Continue to invest in content, strengthen our brands, and by doing that, grow our audience share. That’s our north star. Underneath that, I’m trying to figure out how we work with more distributors, how we continue to foster our creative talent and relationships to develop the best creative, and then how to think strategically about other organic or inorganic opportunities that may exist.
“Strategically, we know what we want to do. It’s always the same thing. Now we have to go out and execute and we’re confident that in time we’ll bear fruit on it.”
The strategy for Eurosport
“It’s not like we’re thinking of calling it Discovery Sports,” says Perrette of Discovery’s plans for a revamp at Eurosport. “Their team has done an incredible job and frankly one of the reasons we wanted to be owners of this business is because of what they’ve done, and so it’s not as though we look at this as an overhaul. They add an additional breadth to our portfolio for advertisers and for distributors, but with one investment, one acquisition, we could have an incredible brand, and live production know-how in over 55 countries.”
Eurosport’s production chops have greatly impressed Perrette and the rest of the Discovery executive team. While the two networks operate in the same territories across Europe, Eurosport’s strategy, by and large, has been to concentrate on a pan-European feed, a pan-European production based in a central hub in Paris, and to complement locally as and when the opportunities arise. Discovery has tended to place the emphasis on localisation, placing full teams on the ground in individual markets.
"It’s not that Discovery has arrived and Daddy Warbucks is here and somehow the vaults have opened."
“The team has done an incredible job of being very smart and scrappy,” says Perrette of Eurosport’s operation. “Their technical operations and their production capabilities for so many markets on a local basis for the cost that they do it on is frankly second to none. What we’re looking at is how to gain those efficiencies, but try to use more technology to enhance the visuals on air. What are the graphics packages we can look at?”
A look and feel update is part of a three-pronged strategy that also includes investment in rights and a potential brand repositioning. Underpinning those objectives is a general goal to slowly but surely align the Eurosport and Discovery corporate cultures, and a shift of emphasis towards the local markets.
“We want Eurosport to evolve,” says Perrette. “We believe in this business; we believe in the asset, we believe in the brand, and we are operators. For us this is about selectively and smartly reinvesting in the brand, in Eurosport, to try and find ways to improve and increase its position in each of the markets it operates in. Our priorities for Eurosport are first and foremost securing the rights we have and selectively looking to add more; looking to enhance the on-air look and feel to keep the channel as cutting edge as any other sports channel that’s in the market; and thirdly, looking at the brand from a positioning standpoint, for the audience, so that is feels as fresh, contemporary and popular as ever.”
Eurosport has taken pillar positions in a handful of sports in recent years, notably cycling, tennis, motorsport and winter sports. Those positions, Perrette insists, will be maintained, even if the communication around them might begin to change.
“I think sometimes too much is sold to make it sound like these are fringe sports,” says Perrette. “These are not fringe sports, they’re popular sports of which we are fortunate to have some great franchises - in the tennis, cycling and winter sports and athletics categories in particular. We got over 50 million people watching the French Open this year and that’s a huge number.”
Perrette says that he, personally, will have an increasing presence in the sports rights market in the coming months and years – and a trip to this year’s Sportel is part of that process - alongside newly-installed Eurosport chief operating officer Yitz Shmulewitz. Zaslav and the US-based leadership will also have input into the rights acquisition plans. But in terms of the nitty gritty, Augustin and his team, particularly director of rights acquisitions and sales Laurent Prud’homme and deputy managing director for international communications, marketing and external relations Geraldine Filiol, will continue to take care of business.
So far, Perrette has limited himself to meetings on the “bigger franchises” and there have been one or two of those on the horizon of late. Arguably the most important recent deal for Eurosport came with the extension of its Roland Garros deal in November. The new deal will run to 2021 and includes a host of new exclusive rights, including in key territories such as Italy and Spain.
This year, though, soccer has been on the agenda. Just a few days after the acquisition went through, a report on Bloomberg declared that Eurosport was bidding for Serie A soccer rights in Italy. The package included 132 games and had a starting price of €705 million – a different kettle of fish altogether for Eurosport. Ultimately the rights went to Sky Italia and Mediaset, but the speculation is now mounting as to where Eurosport will turn next. In January, Zaslav gave an interview suggesting that Eurosport’s UK channel would be given particular attention, and all rights, including those of the English Premier League, were not out of the question. “We will be selective,” Zaslav said. “We will look at opportunities to take bigger swings in certain markets.”
Eurosport extended and expanded its Roland Garros rights deal to 2021 in November.
Nine months on and Perrette is saying broadly the same thing, but he is happy to address the speculation that followed his chief executive’s comments. “The speculation about us bidding on these rights or those rights is frankly completely unfounded at this point,” he says. “To be clear, Discovery’s success has been built for 30 years on being very smart and very disciplined about how it invests in content and making sure it gets a return on its content. That business operating model is going to continue. We will remain disciplined, we will remain smart. We’ll look at a lot of stuff, but that doesn’t necessarily mean we’re going to play in everything. We want to try to enhance and improve the content that’s on the networks, but most importantly it’s not that Discovery has arrived and Daddy Warbucks is here and somehow the vaults have opened.
“But I also think it’s important to remember that while there’s a lot of talk of Eurosport being in this tier two, we had a record French Open, we just finished an incredibly strong US Open, we have a lot of cycling, we have Bundesliga rights in parts of Eastern Europe. We have some Premier League rights in parts of Eastern Europe. So Eurosport is in high, premium, strong franchises. I think there’s a lot of focus, obviously, on the three to five big European football franchises. And those are clearly very important, very valuable. But the world doesn’t only revolve around those things.”
Caught between urging caution and declaring ambition, Perrette is able to state one thing without caveat. “In three to five years, Eurosport will look different than it does today.”
The natural extension, he explains, of an investment in rights and upgraded graphics package and on-air look and feel is a tweak to the brand. “How do you position it in the eyes of the viewer so that this is not your grandfather’s Eurosport. That’s the natural evolution: if you do the first two, you’re going to have to do the third. The teams there are enthusiastic and excited about now having clarity and an owner that wants to try to invest in the business moving forward.”
Discovery’s investment has only just begun.
This is an edited version of the a story that appeared in the October edition of SportsPro magazine.blog comments powered by Disqus