OWN’s grown, Discovery says

Net's launch to cost more than originally planned

Discovery Communications’ investment in the launch of the Oprah Winfrey cable network OWN will exceed what had originally been earmarked, executives said Tuesday in reporting second-quarter earnings.

Under the terms of its joint venture with Oprah, Discovery was committed to spend $100 million to get OWN up and running. Those costs will now cross $100 million, said Discovery chief financial officer Brad Singer, in part, because the net’s bow has been delayed. Discovery has spent $75 million so far on OWN, now set to debut in January.

Executives said they were happy with the progress OWN is making to attract advertisers and develop programs. Discovery CEO David Zaslav said Winfrey’s hands-on approach and enthusiasm “is powerful and contagious.” Winfrey will appear on the network from the start, but will not be permitted to host a talkshow until fall 2011.

Like the handful of media companies reporting second-quarter earnings so far, Discovery got a boost from advertising growth. Total revenues rose 11% to $963 million, and operating profits were up 18% to $455 million. In the U.S., where Discovery operates 13 channels, ad revenues were up 13% to $329 million. Globally, where Discovery has a presence in 180 countries, ad revenues rose 38% to $106 million.

Zaslav said he was pleased with how Discovery’s upfront advertising sales have gone, citing high single digit price increases and the fact that much of the upfront gain was not because advertisers were shifting dollars from the scatter market.

Other highlights:n Net profits fell 40% to $106 million, largely because of tough comparisons to the year-ago period where gains from its sale of 50% of Discovery Kids to Hasbro was booked and from tax implications of the retirement of some debt. Without those one-time occurrences, net profits rose by $80 million. The rebranded channel with Hasbro, the Hub, is set to launch Oct. 10.

• Discovery refinanced $3 billion in debt in the quarter, and announced a $1 billion stock repurchasing program.

• Zaslav said he was quite happy with the potential to grow Discovery’s existing brands, citing specifically Animal Planet and ID, and was in no rush for acquisitions.

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