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Telenor and Discovery End Fight Over Nordic License Fees

Nordic operator Telenor ASA's just-resolved battle against Discovery Communications Inc.'s Discovery Networks' carriage fee hikes risked potential churn as Telenor dropped nearly all Discovery-owned networks in its Nordic coverage area during the dispute. The standoff also put strain on Discovery, with Telenor representing a significant source of reach for its channels.

A deal was reached on the morning of Thursday, Feb. 11, with Discovery's channels restored to Telenor systems soon after. Pricing details were not released, but the deal covers the next several years. It is uncertain whether the new deal results in a price increase for Telenor subscribers; however, the agreement includes rights for TV Everywhere services. Local press reports put Discovery's estimated losses in Norway during the renegotiation at around $2.3 million.

A sticking point in the deal was Discovery's recent acquisition of rights to broadcast games from top Norwegian soccer league Tippeligaen. This first major soccer acquisition for Discovery in Norway gave it much more leverage with Telenor.

Missed programming from Discovery's main Norwegian channel TVNorge (NO) will receive a second airing and will be available in Telenor's catch-up services. Telenor will not offer additional compensation to its subscribers for the temporary loss of channels, having instead offered upgrades and other channel packages during the outage.

TV networks in Europe and especially the U.S. have typically passed on the cost of expensive sports deals including a margin for profit. In fact, after securing a major rights deal, many programmers go back to distributors and ask for an additional license fee even if the contract has several years left before renewal. Distributors that have refused new terms have sometimes seen TV networks respond by providing additional feeds with new games blacked out and replaced with less-attractive programming.

Telenor is a major Nordic multichannel provider, with an estimated 2.0 million video subs as of end-June 2015. It operates the Canal Digital brand in Norway,DenmarkFinland and Sweden, and Telenor B2 Bredband in Norway. Its failure to negotiate carriage terms with Discovery had a significant impact on subscribers, with the prior deal expiring Friday, Jan. 8, and all the Discovery networks removed from Telenor platforms as of Monday, Feb. 1, following a grace period.

Discovery Networks in the Nordics

Discovery Networks, which distributes 24 networks, including former SBS Broadcasting Group networks, throughout the Nordics, experienced a major reduction in its reach in the region during the carriage-terms standoff. The impact of losing an estimated 2.1 million homes, or 18.2% of Nordic multichannel households, was substantial.

Nordics TV Networks Costs Per Sub Per Month Range

Discovery said it was asking for a fair increase. Telenor last negotiated a deal for carrying the SBS networks, for which negotiations are now synced with other Discovery networks, in 2010. According to Discovery, the new terms it requested were on a par with what other broadcasters receive from Telenor. Discovery also noted that since 2010, Telenor-owned cable and DTH operator Canal Digital has increased subscriber fees by 30% and Discovery has not received any of that increase.

Telenor contended that Discovery's requested license terms were not justified and that the network was in effect asking subscribers to pay for Discovery's recent expensive sports purchases — its deal for 2018-2024 Olympics rights in Europe, for instance, cost €1.3 billion.

Telenor pointed to recent carriage issues Discovery has had in the region with operators Telia and Boxer and said the programmer was employing the same strategies to force Telenor to accept large price hikes. Telenor feared that corresponding subscription price increase might lead to elevated churn, especially given the Scandinavian region's highly developed OTT market.

Telenor TV Households

In Norway, Discovery suffered the largest drop in penetration during the standoff, as Telenor accounts for 43.5% of total subscriber households. Sweden saw a drop of 19.9% as Discovery lost customers from operators Canal Digital and Bredbandsbolaget, which is also Telenor-owned. Denmark and Finland contributed less to the drop, with a respective 2.8% and 2.7% of total multichannel households having lost service.

Discovery has been regularly making significant European programming acquisitions, including for the Olympics. As Discovery acquired the SBS networks in 2013 and the Eurosport networks in 2015, it now has the ability to show the games in the region.

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 Discovery has ramped up activity around the Eurosport networks in the Nordics, re-launching country-specific Eurosport networks in both Denmark and Norway — Eurosport (DK) and Eurosport (NO). This has been supported with strategic popular local sports acquisitions that have enhanced the networks' desirability.

Discovery's negotiations with Telenor took a public turn, with both companies leveraging their social media pages to point fingers at each other in explaining the dispute to subscribers. Discovery Networks Norway managing director and editor in chief Harald Strømme issued a statement via the company's consumer-facing website stating that all Discovery was asking for was the equivalent of a cup of coffee per subscriber per year.

Prices for a cup of coffee in Norway

Telenor responded that if this comparison were to be believed, then Discovery was asking for the most expensive cup of coffee in Norway.

Discovery Networks Sweden's head of PR Dan Panas further expanded on the coffee price comparison angle, saying that Discovery was asking Telenor for the equivalent of 2.00 Swedish kronor per customer per month. 

As of Feb. 10, US$1 was equivalent to 8.48 Swedish kronor.

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