Discovery Communications posts 32% boost in Q4 profits

The cable giant says it will invest an additional US$50 million in Oprah Winfrey Network, largely to go to programming, and aims to make Investigation Discovery a "top 20 network."
February 14, 2011

Discovery Communications saw a revenue increase of 9% for full year 2010, and a fourth quarter revenue boost of 7% over last year’s Q4, according to financial results released Friday.

Fourth quarter net income rose 32% to US$205 million compared to $155 million for the fourth quarter the year prior. Revenues climbed to $1.02 billion compared to $950 million for the fourth quarter results of 2009.

For the full year, revenues increased $315 million to $3.77 billion, a 9% increase over 2009. The company says the increase was driven by 9% growth at U.S. networks and 11% growth at international networks. Full year net income from continuing operations rose from $547 million in 2009 to $641 million for 2010.

Ad revenue for U.S. networks rose 13% for the fourth quarter thanks to higher sellouts and increased pricing. For the full year, ad revenue for the U.S. nets also increased by 13%.

International networks’ revenues for the fourth quarter increased by 4% to $358 million, mostly driven by distribution revenue growth of 7% and ad revenue growth of 5%. For the full year, revenues for the division rose 11% to $1.25 billion due to an ad revenue increase of 23%, which stemmed from higher pricing in the UK and higher sellouts and audience delivery in Latin America, Asia Pacific and EMEA.

During a conference call to investors, Discovery Communications CEO David Zaslav said the company’s strategic investments in its content and brands over the course of the year resulted in “significant progress in further developing our next generation of growth assets” both from ratings and advertising gains by emerging networks and the launch of joint ventures such as Oprah Winfrey Network and The Hub.

Zaslav also highlighted the gains from Investigation Discovery, citing its status as the fastest-growing network in all of cable in both distribution and viewership. The growth of the net is “something I haven’t seen in my 25 years in the cable business,” said Zaslav, who added the company will invest further in its growth, as “we are convinced ID can be a Top 20 network.”

Zaslav also lauded Animal Planet’s growth, citing the double-digit primetime viewership climbs of its two top series, Whale Wars and River Monsters. He also said Science Channel “found its footing and voice last year,” growing viewership by 22%, and said the rebranded Discovery Fit & Health should deliver “enhanced economic value in the year ahead.”

For the flagship channel, Zaslav said the performance of high-rating new series such as Gold Rush: Alaska and Flying Wild Alaska makes the company “excited about the direction of the Discovery Channel.” Zaslav called TLC “sure-footed and clearly firing on all cylinders,” citing the multi-program franchises spawned from Cake Boss, Say Yes to the Dress and Police Woman as contributing to its “deep and diverse programming line-up.”

As for OWN, Zaslav cited the net’s impressive launch, with 18 million viewers in its first week, and strong long-term advertiser and affiliate support as significant pluses for the joint venture. He also emphasized that 24 new shows are slated to launch on the net this year, and said the company is hopeful that OWN can reach OIBDA (Adjusted Operating Income Before Depreciation and Amortization) break-even in 2011.

CFO Brad Singer said that in 2011, Discovery Communications will likely increase investment in the network by an additional $50 million of incremental funding which will largely go into programming. Zaslav said the funding increase will help the net “continue on the path to profitability,” and that the company looks at the net as a “big growth engine over the next couple of years.”

Regarding new media and Discovery’s stance towards multi-platform distribution, Zalsav said that the company is “encouraged” by TV Everywhere “or any business model that gets us good economic return” and will continue to look for an online distribution solution that won’t undermine the dual revenue stream cable business model.

Zaslav also touted the company’s approach to social media, saying, “We’re a non-fiction company, so we have real characters. And characters have fans… We’re going to continue to push in social media because we think that will help us.”

About The Author
Daniele Alcinii is a news reporter at realscreen, the leading international publisher of non-fiction film and television industry news and content. He joins the rs team with journalism experience following a stint out west with Sun Media in Edmonton's Capital Region, and communications work in Melbourne, Australia and Toronto. You can follow him on Twitter at @danielealcinii.