Market Overview

Can Discovery Networks Produce an Online, Netflix-Sized Hit?

Discovery Communications (NASDAQ: DISCA) has formally launched TestTube.com, a new online video hub designed to reach consumers that aren't tuning into Discovery's primary pay-TV channels.

According to The Wall Street Journal, TestTube was created after the Discovery Channel lost six percent of its viewers that fall within the 18-34 age group.

Unlike the Discovery Channel, TLC, Animal Planet and other networks within Discovery Communications, users do not have to subscribe to Comcast (NASDAQ: CMCSA) cable or Dish Network (NASDAQ: DISH) to view TestTube content because all of the videos are hosted on Google's (NASDAQ: GOOG) mammoth video hub, YouTube.

Unfortunately, its YouTube inclusion could create some confusion among regular visitors. The site already uses the TestTube name to promote its ideas incubator, which is located at YouTube.com/TestTube. There is also a health and beauty company called New Beauty Test Tube that comes up pretty quickly when typing "TestTube" into the Google search box. When typing "TestTube" into the YouTube search box, viewers will find a plethora of health and beauty videos and a couple relating to the topic of test tube babies. As of this writing, Discovery's videos did not appear.

This could change in the weeks to come as Discovery launches its marketing campaign for its new video service, but some viewers have already been exposed to what TestTube has to offer.

For example, Sex Plus with Laci Green (a sex education show) has been on YouTube for several months. Her videos typically garner a couple hundred thousand views each and will reportedly become part of the TestTube family.

At the same time, Nature Hates You recycles old Discovery Channel footages for online consumption.

While TestTube is launching on YouTube, Variety has reported that Discovery will bring the digital network to Microsoft's (NASDAQ: MSFT) Xbox Live and Apple's (NASDAQ: AAPL) iTunes, as well as Roku, TiVO (NASDAQ: TIVO) and other devices.

Despite the planned expansion, Discovery does not seem to have any plans to join YouTube's growing network of paid channels. This is another sign that YouTube's leading content creators are skeptical of the format.

When YouTube launched its hub for paid channels, the site introduced the world to a number of little-known indie companies with very little prime-time content.

The problem with the paid channel system is that it eliminates the opportunity to share and openly view whatever appears on YouTube. It diminishes the long-term growth potential (ex: Psy's "Gangnam Style" would not have gotten one billion views if everyone had to pay to watch it). And most of all it is completely different from the YouTube format that people have grown to love.

Thus, Discovery is going to give viewers TestTube content for free, knowing that it would be better to earn a few hundred thousand dollars selling ads than it would be to bet on YouTube's paid channel option.

Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ

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