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Discovery Sees Q3 Profit Fall On Lionsgate Impairment, Overseas Declines

Discovery Communications said third quarter profit declined as the company grappled with to performance shortfalls in its  international operations and suffered a $50 million impairment charge related to its decision to acquire a minority stake in Lionsgate late last year.

The Silver Spring, Md. owner of the Discovery Channel, TLC and Discovery ID, said net income fell  22% to $219 million compared to $279 million in the year-earlier period. Revenue in the period was basically flat, totaling $1.556 million. The company said a 2% revenue increase at its U.S. operations and a 19% increase at its education unit were offset by a revenue decline of 3% a tits international holdings, largely due to the effects of currency fluctuations.

Discovery “faced challenging but expected headwinds this quarter,” noted David Zaslav, the company’s chief executive, in a prepared statement.

The company said its U.S networks saw ad sales revenue fall 3% during the third quarter. Revenue rose  2% to $793 million., owing to rate hikes passed on to cable and satellite distributors, despite what Discovery said was a “slight decline” in the homes it reaches. Difficulty was more pronounced at the company’s international networks, where revenue fell 3% to $720 million. Ad sales fell 6%.

In a research note issued Tuesday, media analyst Michael Nathanson called some of the company’s performance “ominous,” suggesting investors might see other media companies show similar issues with advertising and affiliate revenue.


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