You will be redirected back to your article in seconds

Domestic Advertising and Distribution Gains Drive Discovery Q1 Earnings

Discovery Inc. delivered advertising and affiliate revenue growth in the U.S. in the first quarter even as international revenue fell against tough year-over-year comparisons.

Discovery on Thursday reported total revenue of $2.7 billion, in line with Wall Street’s expectations and up 17% from the year-ago quarter. However, adjusted for the impact of Discovery’s Scripps Networks Interactive acquisition last year, Discovery revenue was down 5% for the quarter. Net income reached $384 million, compared to a loss of $8 million in the year-ago quarter.

Adjusted operating income was up 21% on a pro forma basis to $1.2 billion.

Discovery’s solid showing on the domestic front was offset by declines in its international division, which faced tough year-over-year comparisons after Discovery’s Eurosport unit carried the winter Olympics in Q1 2018.

U.S. networks saw advertising and distribution gains of 4% on a pro forma basis, with ad revenue reaching $1 billion and distribution hitting $697 million for the quarter. In a sign of strength in the broader U.S. ad market, Discovery’s revenues grew beyond expectations even as viewership at its flagship channels was generally soft.

On the international side, revenue fell 15% to $953 million while adjusted operating income was up 46% to $219 million due to the absence of Olympics rights costs.

“In the first quarter we delivered a solid start to 2019, as we continue to power people’s passions through our loved brands and our owned global IP in genres that nourish audiences around the world,” said David Zaslav, president-CEO of Discovery Inc. “We are a differentiated media company and have the right strategy, assets, brands, and management team necessary to drive additional shareholder value.”

Discovery is starting to reap the rewards of having the Scripps channels in the family for nearly a full year. Operating expenses at its domestic channels climbed to $691 million, from $522 million in the year-ago quarter. But on a pro forma basis, operating expenses were down 12%, which Discovery attributed to “content synergies” from the Scripps deal and lower restructuring costs compared to the year-ago quarter.

Discovery’s U.S. channels are still feeling the effects of cord-cutting. Although Discovery outlets were added to Hulu’s digital MVPD channel bundle last fall, total subscribers for Discovery were down 4% in March compared to March 2018, Discovery said. Last month, Discovery cut a deal with YouTube to add eight channels to the YouTube TV platform, which has about 1.5 million subscribers at present.

Zaslav told analysts that he sees benefits for Discovery in being on the emerging skinny bundles because it is a more selective channel list on services that typically draw a younger consumer than traditional MVPD providers.

“The skinny bundles in many cases may be much better for us,” Zaslav said. “People will spend more time with our channels.” The younger audience will have benefits on the advertising side, he added.

Zaslav acknowledged that the domestic pay-TV industry that has powered Discovery for 30 years is “in long-term secular decline” but there is still growth potential for Discovery as it runs the digital MVPD table with channels placed on all of the major streaming bundle packages: Sony’s PlayStation View, Dish’s Sling, YouTube TV, Hulu and DirecTV Now.

Zaslav also emphasized the potential of its growing suite of SVOD offerings overseas with services devoted to golf, cycling, automotibles and now natural history and factual programming through the partnership Discovery struck last month with the BBC. Discovery will marry the BBC’s highly rated “Planet Earth,” “Blue Planet” and other franchises with Discovery’s vast archive of docu programs devoted to science, space and natural history. He predicted it would be an educational draw for families with young children.

Zaslav and Discovery CFO Gunnar Wiedenfels reinforced Discovery’s positive outlook by affirming second quarter guidance of domestic advertising growth up in the 3%-5% range. Affiliate growth is projected to be up compared to the 4% gain in Q1, thanks to the new digital MVPD deals. International advertising is expected to grow in the mid single-digit range. International affiliate revenue growth is expected to be in the low single-digit range, Wiedenfels said.

More TV

  • BBC Orders Spoof Talk Show Fronted

    Spoof Talk Show Fronted by an Animated Vladimir Putin Coming to the BBC

    The BBC will air a spoof talk-show fronted by an animated Vladimir Putin. The U.K. pubcaster has ordered two pilot episodes of “Tonight With Vladimir Putin,” a semi-scripted talk show hosted by a CGI representation of the Russian leader. The first guest will be Alistair Campbell, a former high-ranking political spin doctor in the U.K. [...]

  • Upcoming Fantasy Shows Like 'Game of

    10 Upcoming Shows to Watch if You're Mourning 'Game of Thrones'

    Millions of people’s Sunday night routines are ruined now that “Game of Thrones” is over, and there are holes in their hearts as big as the hole in The Wall that are aching for a new fantasy series to fill them. Several prequel series are on their way, but as there’s no word on just [...]

  • Game of Thrones Composer Ramin Djawadi

    'Game of Thrones' Composer Ramin Djawadi: 'I'm Still in Denial'

    Since the first season, Ramin Djawadi has composed the music for “Game of Thrones” and created the epic tunes, including the iconic theme song, heard over the series’ most memorable moments. With the series finished, he talked with Zane Lowe on Apple Music’s Beats 1 about his experience on the show and an upcoming 20-city [...]

  • TUPAC SHAKUR black panther collection

    ‘Defiant Ones’ Director to Helm Docuseries on Tupac, Who Assaulted Him in 1993

    Director Allen Hughes, who helmed the award-winning HBO documentary “The Defiant Ones,” has closed a deal with Tupac Shakur’s estate for a five-part docuseries for which he will have full access to all of the late rapper’s released and unreleased recordings, writings and poetry, according to an announcement from his rep. The announcement says the [...]

  • Ellen DeGeneres -- The Ellen Show

    Ellen DeGeneres Extends Daytime Talk Show Run Through 2022

    Ellen DeGeneres is sticking with her daytime talk show. DeGeneres announced Tuesday that she has signed a new deal to continue hosting “The Ellen DeGeneres Show” through 2022. There had been rumors for some time that DeGeneres was planning to leave the show when her current contract was up in 2020, something she leaned into [...]

  • How YouTube Is Trying to Get

    How YouTube Is Trying to Get Will Smith His First-Ever Emmy Nomination (EXCLUSIVE)

    YouTube could be the key to Will Smith finally earning a Primetime Emmy nomination — or win. The superstar Formerly Known as the Fresh Prince has been nominated for two Academy Awards, five Golden Globes and one Screen Actors Guild Award, and has won four Grammys (out of eight nominations). Yet a Primetime Emmy nomination [...]

More From Our Brands

Access exclusive content