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Discovery to drive OTT as part of $2B international PGA Tour golf rights deal

Starting in select nations with the 2019 season, Discovery Inc. is teeing off an expansive international rights deal with the PGA Tour that will include a dedicated over-the-top service.

The direct-to-consumer offering is part of a 12-year pact running through 2030 that carries a value of $2 billion, with escalating annual rights fees. The agreement extends to the linear side, encompassing some 2,000 hours of content annually, cutting across the six properties operated by the PGA Tour. As current rights expire around the globe, Discovery’s PGA Tour package ultimately will bring coverage outside of the U.S. into 220 markets and territories.

Discovery will allocate $50 million in 2019 and 2020, and then $100 million the following year. The rights ramp over the balance of the deal.

Additionally, Discovery will expend between $20 and $30 million annually in marketing and operational expenses over each of the first three years of the pact. Discovery anticipates startup losses in the early years before securing positive cash flows over the life of the pact.

On the linear side, Discovery will emulate the game plan it deployed for the 2018 Winter Olympics by aiming to monetize the rights through sublicensing, advertising, affiliate and digital subscriptions. Discovery, in partnership with the tour, could opt to air coverage on its pay and free-to-air channels or decide to continue relationships with dedicated golf networks, or launch its own channels, according to President and CEO David Zaslav.

Alex Kaplan will head the venture as president and general manager. He previously served as executive vice president, commercial, for Eurosport Digital, where he helped grow the Eurosport DTV business to over 1 million subscribers.

At a June 4 press conference, PGA Tour Commissioner Jay Monahan said the PGA Tour has historically handled its own international rights negotiations. At the end of 2016 and early the following year, it began assessing its global portfolio and with more international stars set to emerge, it wanted to expand its footprint farther. Conversations ensued with Discovery, whose multiplatform delivery of the Games from Pyeongchang, South Korea, including delivery through streaming service Eurosport Player, reached 386 million cumulative viewers, generating 4.5 billion views. Monahan said the delivery by the Eurosport Player helped put the Discovery deal over the top, so to speak.

As was the case with the Olympics, Zaslav said the OTT golf service will serve up plenty of localized content around tour players and events. Looking to retain as much flexibility as possible, Zaslav said the streaming service could carry different price points in different nations.

Monahan talked about the globalization of the game, noting that half of the top 50 players in the world reside outside the U.S.; that 26 million of the 50 million who play the game live abroad; and that golf is a $170 billion industry, with 55% of its revenue generated internationally.

With the potential for 4 billion global subscribers, Zaslav expressed high hopes for the direct-to-consumer service. "There’s no reason we shouldn’t have 10, 20, 30, 40 million people around the world over the next couple of years who love golf. If you love golf, why wouldn’t you have this?"

Rather than a regional approach, Zaslav said Discovery wants to take a bigger swing, like the FAANG companies. "The only guys who have taken on a global attack have been the big guys. We look at them, Jay and I and we go 'Wow. That’s the approach' And so, the whole idea of this is, we start with the globe."

Beginning in 2019, Discovery’s PGA Tour coverage will reach Australia, Canada, Italy, Japan, Portugal, Russia, Spain and The Netherlands. Poland and South Korea will follow in 2020, before Belgium, China, Germany and South Korea get in the game in 2021. Denmark, Finland, India, Norway, Sweden and the U.K. are on course for 2022, with France landing in 2024.

Expiring in 2021, PGA Tour rights in the States are held by CBS (US) and NBCUniversal Media LLC's NBC (US) and Golf Channel (US). The Golf Channel Inc., which has a significant international presence, didn't return queries by press time seeking comment about how the Discovery/PGA Tour pact might impact that part of its business.