OWN execs optimistic on increasing affiliate fees

Discovery launches Oprah Winfrey channel Jan. 1

Discovery Communications has spent $107 million of the $189 million it has earmarked for its joint venture cable channel, OWN, with Oprah Winfrey — one of the most highly anticipated launches in cable TV history — executives said Tuesday in reporting third-quarter earnings.

OWN, formerly Discovery Health, bows Jan. 1 in 78 million homes. Sixteen shows have been announced, said CEO David Zaslav. “Oprah is really all in” on planning for OWN, he added.

Zaslav said he sees tremendous upside to boost affiliate fees for OWN vs. Discovery Health and the immediate goal is to expand its reach to 90 million homes.

The $189 million is being considered a loan and will be paid back to Discovery with interest, Zaslav said.

When asked what metrics Discovery will use to measure the success of OWN, chief operating officer Peter Liguori said one would be doubling Health’s ratings, which could happen once shows from Rosie O’Donnell, Gayle King and others are added to the slate in the months after the launch. Another metric, said Liguori, will be on the advertising front by “going beyond spots and dots” to secure full integrations.

Zaslav added, “The goal will be to try to find the right voice for the network.” He doesn’t see a problem there since Winfrey “is, if not the best, one of the best brands in media.”

Overall, Discovery’s net profits were up 73% to $161 million in the quarter on revenue gains of 11% to $926 million.

Discovery continued to see healthy gains in advertising at its U.S. networks, with revenues up 16% to $304 million. Zaslav attributed the boost to higher ratings, up 12% on average across all of Discovery’s domestic nets. So far this year ad dollars are up 13% to $899 million.

“We are still seeing strong national demand,” Zaslav said.

With $1 billion in cash on the books in the quarter, Zaslav said he wouldn’t rule out acquisitions, most likely overseas. “We have strong teams internationally,” he said. “If a deal comes along that helps us accelerate growth, we would look at it.”

International networks now account for 33% of Discovery’s revenues, with outlets in 180 countries.

Discovery is also spending its cash by buying back shares, shelling out $38 million in the quarter as part of a $1 billion repurchasing program announced in August.

Other highlights:

n Cable channel the Hub (formerly Discovery Kids), Discovery’s joint venture with Hasbro that launched last month, has attracted 50 new advertisers.

n Discovery is working hard to make TLC its hot global brand; goal is to have the channel in 100 million homes overseas. “Like in the U.S., TLC can help build a nice female complement to Discovery,” Zaslav said. TLC is in 27 million homes in Europe and Asia.

n Discovery’s ID channel (Investigation Discovery) is now the fastest-growing network on cable, with viewership so far this year up 52% in the 25-54 demo. It is seen in 70 million homes, Zaslav said.

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