Discovery profits up on overseas growth

CEO touts content growth prospects, sez OWN has 'nice momentum'

Solid growth in distribution and advertising, especially overseas, buoyed profits at Discovery Communications in the third quarter as CEO David Zaslav said near-term ad market trends look upbeat and the future for content providers has never been better.

Discovery, parent of Discovery Channel, TLC, Animal Planet, Science and ID and partner in OWN: Oprah Winfrey Network, the Hub and 3net said net income rose to $238 million from $189 million the year before.

Revenue jumped 18% to almost $1.1 billion with 19% growth at both domestic and international networks.

ID, the fastest growing net, saw viewership jump 50% year over year.

OWN, however, has been struggling for traction.

“Oprah is now the full-time CEO and we are working hard to develop content that will appeal to her audience,” Zaslav said. “We are building some meaningful audience growth and flow. Viewership is up from previous levels (and) there’s some nice momentum going into 2012…We are starting to swing in a positive direction in term of getting people to spend more time with us,” he said.

Asked during a conference call about the hot trend of the moment — content deals — he said Discovery is “rooting for Netflix” and other news models as it looks for sustainable ways to monetize its extensive library. Discovery has inked a two-year deal with Netflix for older shows, with an option to renew for a third year.

“We invest well over $800 million annually in content across our portfolio so any investment needs to ensure we receive an appropriate return for that investment,” he said.

Netflix “gives us some additional meaningful economics. We are going to see how that plays out. We have some flexibility in term of content that’s on it (and) with the one-year option. “It creates a whole new window,” he said.

Discovery’s domestic revenue of $695 million benefited from $77 million in expanded licensing deals. Distribution revenue grew 33% to $350 million. Ad sales were up 6% to $322 million.

Internationally, revenue of $363 million was split between $230 million in distribution, up 20%, and $120 million in advertising, up a hefty 22%). Execs noted 11% subscriber growth at the Discovery Channel.

Discovery bought back $355 million worth of stock during the quarter and another $100 million in the month of October. Like many media companies, it’s been using the depressed market in recent months to take the opportunity to repurchase its own shares, something Wall Street loves.

For the full year, the company said it expects revenue between $4.17 billion and $4.25 billion, and net profit of about $1 billion.