Discovery Networks International went on a shopping spree last year to build its impressive international footprint even further. Center to this was the acquisition of the Nordic assets of SBS from German broadcaster ProSiebenSat.1 in a deal worth just under $2 billion. The company also bought a 20 percent stake in Eurosport, a somewhat intriguing departure for the company. Mark Hollinger, president and CEO, Discovery Networks International, talks about the recent acquisitions and where the company goes next.

VIA SATELLITE: Could you tell us the significance of the SBS acquisition? Why did you decide to invest in the Nordic markets?

Hollinger: As we look at the business now, clearly we are very well established on the international landscape with probably the best international television platform from the point of view of our position and staff in markets, and the distribution and sales infrastructure that we have. We have built this great platform, and now we are ready to go to the next stage of growth for the company. So, we look for the kinds of acquisitions that supplement a very strong organic growth story, with still lots of room to run in pay-TV. The company is now big enough and has the ambition to simply not be limited to what we have traditionally done.

As we look at acquisitions, the types of questions are what are the dynamics of the particular company, what are the markets, and what does the management team look like? What are the growth prospects? What is the business model? Does it fit from any number of perspectives – brand, reputation, target audiences? How does it fit with Discovery’s overall business. As you know, with M&A, you do a lot of looking, before you find the right targets. It may look to the outside world that in the second half of 2012 we decided to go on a shopping binge, and we purchased several companies. But, this is part of an ongoing look for the right assets. It is coincidence that a number of these companies came available at the same time.

VIA SATELLITE: Will the company look to make further acquisitions to boost its international presence?

Hollinger: The way that I would characterize this is that over the last five to six years, we have had an ongoing effort with the full support of our board and management to look for the right assets internationally. You can only buy what is available and what is right for your company. There was a particular concentration of activity in the second half of last year. But, there is not really a change in how we do business development. Even now, post these acquisitions, we still continue to be active on the business development front. If the right assets came along, we are in a position to do deals for the right assets in the right markets. We could announce another deal in six months or three years, it really depends. There are always assets on our list to look at but there is nothing imminent right now.

VIA SATELLITE: What impact is Over The Top (OTT) broadcasting and streaming technologies having for traditional broadcasting? What trends are you seeing in international markets?

Hollinger: I think the U.S. market, with a combination of factors such as the broadband penetration and more types of devices, is unique. I was on a train back from New York and 90 percent of the people were on an iPad and iPad mini. And the success of NetFlix in developing a subscriber base big enough to justify a financial investment in either rights of existing content from people like us or developing your own content, makes the United States a unique market in terms of having all of those factors. We can look and say what is the impact of a well-developed OTT brand in a highly penetrated broadband market and what impact does it have on traditional television? It is hard to tell right now so far. It would be difficult to say that it has had a seriously negative impact, when you look at the viewing figures for TV in the United States. There is not big evidence of cord cutting. It is too early to say it won’t have an impact, but it does not mean it will have a tremendously negative impact on traditional broadcasting. If you go to markets outside of the United States, there is simply not a big enough presence in the market to tell whether it will have an impact or not. Our approach to OTT internationally is generally that we don’t feel the need to be an early player with OTT platforms. We can wait and see how things develop. We have a traditionally strong relationship with the pay-TV operators, and many of them are developing their own OTT platforms. Given that traditionally strong relationship, we are more likely to work with distributor-affiliated platforms in the early stages, than independent platforms. That is why we have had virtually no independent OTT deals outside of the United States. We have licensed a little bit of content to NetFlix in the Nordics. We are in the wait and see camp.

VIA SATELLITE: What are the hot markets internationally for the company? Which markets are you specifically targeting to have more of an impact?

Hollinger: If you look on a continental basis, Latin America is a great growth story. We have been there since 1994. We have a big portfolio there in pay-TV. Pay-TV is still growing at a very strong rate. You have markets like Brazil, Colombia and Mexico, all great growth stories for us; we are launching new channels there. We have launched Investigation Discovery (ID) in Latin America in the past year, which has been such as success in North America. We have a very strong portfolio of Discovery, Discovery Kids, and Discovery Home and Health. We have some real flagship channels there; Latin America is a great story for us. If you look at Western Europe, the world is generally one where pay-TV is not itself growing in any markets at a substantial pace. We have diversified our business in Western Europe to true FTA. We have seen a lot of growth in those markets with single revenue stream ad sales businesses in the United Kingdom, Italy, Spain and Germany.. One of the deals we did last year was buy Switchover Media in Italy, which helps to bolster the free platform in this country. Now, we have six channels in pay, and six channels in free. In Eastern Europe, the big markets are Poland and Russia. Poland is the fourth biggest market on a global basis and Russia continues to grow at a very nice pace. In Asia, the big growth market for us has been India where we have been able to put together a very strong portfolio of eight channels. We also have a sales JV with Sony, which is the second biggest sales house in India. And we have found that through the government’s push to digitize the cable universe, the entire pay-TV universe is becoming more professionalized. There are a number of things that are really pushing the business forward in India.

VIA SATELLITE: Are you even looking at 4K yet internationally? How soon might we see broadcasts outside of the United States?

Hollinger: I can certainly say we are looking at it. It is still early days. I can’t really tell you what our strategy will be regarding 4K, but we had a presentation at our last board meeting about it and it is something we will look at. If history is any guide, and the way in which we look at new technologies, we have been on the forefront of digital cable and HD in the United States. Internationally, we have the biggest portfolio of HD channels of any broadcaster in the world, and we are at the forefront of 3-D. It is in our DNA to look at those things. This has been based on two things: we have realized, that whether getting into new technologies, new markets or new business models, there is often an advantage of being an early entrant. But, we also know that our content looks terrific in these new technologies. We will look long and hard at 4K, and at the right moment, in terms of the economics, when the costs of production and equipment come down, and TVs to handle these services start rolling out, I would expect you will see us there pretty early on.

VIA SATELLITE: Are your demands for satellite capacity on the increase?

Hollinger: All the channels have existing satellite capacity. I think the question for us, as we constantly alter the portfolio, is how to use current capacity in a more efficient way, or do we need to be on other satellites. There is no grand plan to increase that capacity substantially at this point, but it is something we have to look at all the time.