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Discovery bets on Olympics and live sport as it joins streaming wars

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Discovery is banking on its €1.3bn deal to screen the Olympic Games as one of the main ways to propel subscriber numbers for its new streaming service, as the US television group bets that live sport will allow it to take on rivals offerings from Disney, Apple and Netflix.

The new online service Discovery Plus will launch in the US and several European countries including Italy and the Netherlands on Monday, seeking to follow viewers who are turning away from network television in favour of internet platforms.

The launch takes place in the lead-up to the Tokyo games, postponed because of the pandemic and scheduled to begin in July 2021. Eurosport, the Discovery-owned sports network, has paid €1.3bn for exclusive rights to broadcast the world’s biggest sporting event across Europe until 2024.

Andrew Georgiou, president of Eurosport, said Discovery Plus will be the only place where viewers are guaranteed to get full access to every minute of the Olympics live in many European countries. 

“The Olympics is one of the broadest opportunities to bring on a really large cohort of people on to Discovery Plus . . . people that will want to see and stay on with us beyond the Olympics,” he said.

But the strategy is a risky divergence from how online streaming services have developed to date. Netflix, Disney and Apple have so far refused to join traditional TV networks in bidding for sports rights.

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Amazon has been the most willing to enter the fray, acquiring the rights to screen some matches from the National Football League in the US and English Premier League in the UK in an effort to tie sports fans to its Prime delivery and video services.

However, even a giant such as Amazon has so far avoided contracts worth hundreds of millions of dollars — the types of fees that pay-TV groups such as Fox in the US and Sky in Europe have regularly paid for elite sporting events over the past decade. 

Online sports network DAZN, owned by billionaire Leonard Blavatnik, has paid huge sums to screen big boxing bouts and European football matches, but is also yet to turn a profit.

Mr Georgiou said that Discovery’s aim is to rebuild the “bundle” of offering sport alongside entertainment programming for younger, online audiences. 

He said the Olympics has broad appeal which should result in new subscribers for Discovery Plus, believing the company can also retain them with programmes made by its other entertainment networks such as TLC, Animal Planet and the Oprah Winfrey Network. 

However François Godard, analyst at Enders Analysis, cast doubts over whether the strategy would work because the Games only take place every two years and sports fans will prefer to spend on services that show more regular events.

“The Olympics may be an opportunity to raise the profile of [Discovery Plus],” said Mr Godard. “But they will need distribution deals with major pay-TV operators and telcos for sustained subscriber growth.”

The terms of Eurosport’s Olympics deal, which began in 2018, also differ by country, as many nations have broadcasting rules that dictate the Games must also be shown by free-to-air channels. 

Mr Georgiou said Eurosport is in talks to acquire the rights to screen sports that would only appear exclusively on Discovery Plus, seeking an event that can replicate what The Mandalorian, a Star Wars-inspired TV series, has done to attract subscribers to Disney Plus

Though it is unlikely to be bidding for the most valuable deals, which in Europe tend to be for leading football tournaments, Discovery will seek long-term agreements that can expand its coverage of tennis, cycling and winter sports. In December Eurosport signed a deal to screen US PGA golf tournaments. 

“Something that we’re really excited about is to go and invest in new content,” said Mr Georgiou. “Content which we wouldn’t have otherwise potentially invested in for Eurosport, which will become Discovery Plus first or exclusive.”

Discovery Plus will launch with lifestyle shows such as Chip and Joanna Gaines’ home improvement series ‘Fixer Upper’…. © Brian Ach/Invision/AP
. . but it hopes sports, such as coverage of US golf events, will lure new subscribers © EPA

However Discovery expects to lose between $200m and $300m more on its streaming business next year than it has this year as it invests in content, marketing and technology to roll out the new service.

The company behind cable channels such as the Food Network and HGTV reported net income of $300m on $2.6bn in revenue in the three months to September. Discovery shares were hit hard by the pandemic but have pared the worst losses, leaving the stock down about 10 per cent on the year. 

At a launch event in December the company did not guide on how many subscribers it expects to sign up to Discovery Plus, leading to a cautious response from investors. 

Michael Nathanson, analyst at MoffettNathanson, questioned whether the service, priced at $5 a month, can be a “big enough lifeboat” for the company as it grapples with a declining traditional television market. 

“Within the media sector, there is Disney and then there is everyone else,” said Mr Nathanson. However he added that Discovery Plus has better prospects beyond the crowded US market. Outside the US and India, “there is currently Netflix and no clear No 2 player”, he said. 



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Analysis

Iranian TV action thriller delivers warning to Zarif

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It is hardly surprising that Mohammad Javad Zarif, Iran’s foreign minister and nuclear negotiator, is not a fan of Gando, a popular television drama that depicts an incompetent minister who scuppers nuclear talks with world powers by hiring dual nationals who turn out to be spies for MI6.

The series — made by an institute believed to be affiliated to the elite and hardline Revolutionary Guards — “is a lie from the beginning to the end” that “damages foreign policy more than me” by fuelling public mistrust, Zarif said.

By focusing on the nuclear talks, the Guards’ motive goes beyond creating compelling drama, reformist analysts say. Iran is in discussion with western powers about reviving the nuclear deal, a key reformist achievement, and hardliners want to deter the popular foreign minister from declaring his interest in the presidency in what is a crucial election year.

“I’ll be grateful to Gando-makers to let us continue our current job,” Zarif said this month, and commented that he would not run for the presidency.

The possibility of nuclear talks with the US and other powers has complicated an already fraught Iranian political scene ahead of the June election. Many reformists are pinning their hopes on Iran’s top diplomat to reinvigorate the nuclear deal and boost support at the ballot box. Hardliners might prefer to negotiate the deal themselves after the election. The polls are also seen as particularly crucial in case supreme leader Ayatollah Ali Khamenei, 81, dies during the next president’s term.

Pendar Akbari, left, and Ashkan Delavari, right, in a scene from ‘Gando’
Pendar Akbari, left, and Ashkan Delavari, right, in a scene from an episode of ‘Gando’. The series title refers to an Iranian crocodile able to distinguish its friends from its enemies © Bahar Asgari/Shahid Avini Cultural and Artistic Institute via AP

The purpose of Gando, which refers to an Iranian crocodile able to distinguish its friends from its enemies, “is to tell Zarif that should he dare to announce his candidacy, he will be destroyed immediately,” said one reformist analyst. “When the intelligence service of the Guards truly believes in the Gando plot lines, it means even if Zarif decides to defy such warnings, he will not be allowed to run.”

Centrist president Hassan Rouhani is due to step down this year after two terms and it is not yet clear who the presidential candidates will be. Politicians register as late as May and then have to be vetted by the Guardian Council, the hardline constitutional watchdog, which can disqualify nominees. Potential hardline candidates include Mohammad Bagher Ghalibaf, the parliament speaker and a former guards commander; Ebrahim Raisi, the judiciary chief; and Ali Larijani, a former speaker of parliament. On the reformist side, speculation has centred on Es’haq Jahangiri, first vice-president, Hassan Khomeini, a grandson of the founder of the Islamic republic, and Zarif.

A US-educated career diplomat widely respected in the west for his pragmatism, Zarif was instrumental in the historic deal in 2015, under which Iran curbed its nuclear activity in exchange for the lifting of sanctions. But Donald Trump abandoned the accord in 2018, imposed sanctions, including on Zarif, and said he would pursue a new accord to contain Iran’s regional and military policies. The US move emboldened hardliners, confirming to them the untrustworthiness of the US.

Zarif’s background in the US both as a university student and as Iran’s head of mission at the UN — during which he met US politicians including then senator Joe Biden — has long made him a source of suspicion for hardliners.

This wariness of both Zarif and the west is evident to viewers of Gando, as is the heroism of the Revolutionary Guards. Mohammad, the action hero protagonist, warns that western negotiators may sabotage refineries as part of nuclear talks. Mohammad works out of elaborate facilities akin to those in a James Bond film. The fictional foreign minister is advised by a media adviser, the main culprit, “to enter into direct talks with the US and accept the conditions of the leader of the global village”.

Vahid Rahbani in a scene from an episode of ‘Gando’
Vahid Rahbani in a scene from an episode of ‘Gando’. State TV abruptly stopped broadcasting the series that was less than halfway through its 30-episode run © Hassan Hendi/Shahid Avini Cultural and Artistic Institute via AP

The dramatic scenes reflect, in part, the worldview of some of Zarif’s critics. “Reformists, Mr Zarif and his lobby group in Washington [Iranian dual nationals] should be wiped out from Iran’s politics,” said an aide to a senior hardline politician who is a potential presidential candidate. “We have to get rid of this cancerous tumour once for good.”

Gholamali Jafarzadeh, a former conservative member of parliament, said Zarif “is not a good statesman and should not run for president” while “reformists should know that their choices have no chance to be allowed to run”. 

This month, state TV abruptly stopped broadcasting the series that was less than halfway through its 30-episode run. Local media said broadcasts would resume when the presidential race was over. Iran’s centrist president Hassan Rouhani, whose signature achievement is the nuclear deal — alluded to the show on Wednesday and said “people’s money” should not be spent on “fabrication of the truth” and “distortion of facts”.

After three years of sanctions, many voters are disillusioned by the infighting and the prospect of real change, whatever the outcome of the election. “Whether Zarif or a figure more senior than him runs or not, I’m not going to vote,” said Hamid, a 40-year-old engineer. “Let the Guards win the election as they are the ones who are running the country anyway. Why shall I make a fool of myself?” 



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Analysis

Rising inflation complicates Brazil’s Covid-19 crisis

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After seven months in lockdown, Michele Marques received some unwelcome news when she returned to work: while she was away the prices of almost all the products she uses as a hairdresser had soared.

“A box of gloves rose 200 per cent. Colouring products increased at least 100 per cent,” said the 37-year-old from São Paulo, underlining how costs were rising while her revenue had collapsed. “I had to raise the price of my services, too.”

It is a dynamic that is playing out across Brazil, adding an extra layer of complexity to the country’s coronavirus crisis, which has already claimed the lives of almost 350,000 individuals and pushed hospital services to the brink.

With much of Latin America’s largest economy being shuttered, inflation is surging to its highest level in years, fuelling a silent scourge of hunger among poorer citizens that has run in parallel to the Covid-19 pandemic.

“The high price of staple foods — rice and beans, for example — has led to the disappearance of these items from the table of millions of Brazilians,” said Ana Maria Segall, a researcher at the Brazilian Research Network on Food and Nutritional Sovereignty and Security. In the 12 months to the end of March, the price of rice increased 64 per cent and black beans 51 per cent.

“In Brazil currently food inflation has penalised the very poorest, preventing them from having adequate access to food and in many situations leading to hunger,” she said, adding that rising unemployment and the curtailment of social programmes were also contributing factors.

Volunteers hand out food in São Paulo © Alexandre Schneider/Getty Images

Less than half of Brazil’s population of 212m now has access to adequate food all the time, with 19m people, or 9 per cent of its inhabitants, facing hunger, according to a recent report by Segall’s group.

“I’m doing some odd jobs, but it’s not enough to keep us going,” said Jonathan, a 28-year-old who lost his job in the kitchen of a Chinese restaurant in São Paulo when the pandemic began. He said he now struggles to provide enough food for his three young children and pregnant wife.

On a 12-month basis, inflation in June is expected to surpass 8 per cent, far above earlier estimates. In the 12 months to March, food prices jumped 18.5 per cent, while the price of agricultural commodities in local currency surged 55 per cent and the cost of fuel increased almost 92 per cent.

Line chart of Percentage increase over past 12 months showing The price of rice in Brazil is soaring

The developments pose a fresh challenge to President Jair Bolsonaro, who is already under fire for his handling of the Covid-19 pandemic. Across Brazil’s biggest cities, graffiti has sprung up labelling the populist leader “Bolsocaro” — a portmanteau of his name and the Portuguese word for expensive.

The rising prices are also likely to provide useful ammunition to leftist former president Luiz Inácio Lula da Silva, who returned to the political fray last month and may challenge Bolsonaro in elections next year.

“Bolsonaro is to blame for the increase in food prices, he is to blame for everything. They have to remove this guy,” said Maria Izabel de Jesus, a retiree from São Paulo.

Armando Castelar, a researcher at the Brazilian Institute of Economics, said the government had underestimated inflation both in terms of the numbers and also “how much a concern it should be”.

He attributed the rising prices to the devaluation of the Brazilian currency, triggered in part by the stimulus packages passed by the US government — which helped to bolster the dollar and led to higher Treasury yields — and the brighter economic outlook outside Latin America.

“You have a situation where commodity prices are going up because the global economy is going to grow a lot this year. With the growth in the US, interest rates are going up and the dollar is strengthening. This puts a lot of pressure on the exchange rate in Brazil and emerging markets in general,” he said.

As the spectre of inflation loomed last month, the Brazilian central bank raised its key interest rate by 75 basis points, higher than the half-percentage point many economists had expected. A further rate rise is expected next month.

“The central bank acted correctly, but it cannot stop there. It is important not to be too lenient in dealing with this,” said Castelar.

Silvia Matos, a co-ordinator at the Brazilian Economy Institute, also pointed to Brazil’s weakening currency as a contributing factor to inflation. But she said the slide in the real was triggered by investor concerns over Brazil’s deteriorating public finances.

Following the creation of two separate stimulus packages to mitigate the impact of Covid-19, government debt has risen to about 90 per cent of gross domestic product, a high level for an emerging market economy.

The rollout of the second of these packages began this month, with 45m Brazilians set to receive $50 a month for four months.

Critics said, however, these stipends were not nearly enough to keep people both fed and at home in lockdown.

“It is essential that the emergency aid is of a greater value, so that people do not leave the house but no one also stays at home starving,” said Marcelo Freixo, a federal lawmaker with the leftwing PSOL party.

“We need to reduce the circulation of the disease. Brazil is already experiencing 4,000 deaths per day. We will reach 500,000 total deaths by the middle of the year.”

Matos says that inflation had hit poorer citizens much harder than middle-class and rich Brazilians because a larger portion of their income was dedicated to food, the price of which has increased substantially.

“The only thing that could help right now is to get out of this pandemic,” she said.

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Analysis

Can CVC pull off a $20bn ‘deal of the century’ at Toshiba?

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Proposed management buyout looks like an improbable win for the Japanese conglomerate’s embattled CEO



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