Discovery reports Q2 profit rise, invests in Chinese MCN

Distribution revenue helped boost Discovery Communications' profits in the second quarter. The cable giant has also taken a minority stake in the Chinese MCN VS Media. (Pictured: Discovery CEO David Zaslav)
August 2, 2016

Discovery Communications’ profits rose in the year’s second quarter thanks to a boost in distribution revenue and improved operating results.

The Discovery Channel, TLC and Investigation Discovery parent company’s second quarter net income increased 43% to US$408 million compared with $286 million in the same period last year.

Meanwhile, total revenue went up 3% to $1.7 billion compared with $1.65 billion a year ago.

On the domestic front, second quarter revenues jumped 7% to $873 million thanks in part to 8% growth in distribution due to higher rates, though the gains were partially offset by a decline in subscribers. Ad revenue also went up, by 5%, also due to higher pricing.

However, international networks’ overall revenue was down 1% to $790 million as a 2% rise in distribution to $427 million was offset by a decline of 7% in advertising revenue.

“Discovery posted a solid quarter of growth and financial results by investing in premium and diversified content that fuels the passion of superfans on pay-TV, free-to-air, direct-to-consumer and digital platforms,” CEO David Zaslav (pictured) said in a statement.

In May, Discovery initiated a restructuring plan that will include staff buyouts and possible layoffs designed to save up to $60 million in severance and personnel costs by the end of the third quarter. The move was spurred by the shift toward digital media and changing viewer behavior.

In other news, Discovery has taken a minority stake in Chinese multi-channel network (MCN) VS Media. The three-year-old company was founded by entrepreneur Ivy Wong and has more than 55 million subscribers and 320 monthly video views.

VS Media has grown by focusing on and mentoring a pool of more than 500 content creators, which it empowers by “providing production facilities and funding, offering direction and support for cross-marketing, social media and search optimization to enable demonetization opportunities,” Discovery said in a statement.

“I admire the strong community spirit Ivy has fostered with local creators and their followers,” said Arthur Bastings, Discovery Networks Asia-Pacific’s president and managing director, in a statement.

“As Discovery looks to build deeper traction in the Chinese-speaking markets, VS Media’s robust following is incredibly valuable to us. Through their advanced analytics, we can get fully plugged in to the Chinese millennial zeitgeist.”

Discovery’s backing of VS Media follows an investment from automotive distributor CMC Holdings last month. The company recently set up a $4-million content development fund that will be used to produce local formats with creators.

The company will also tap into content from Discovery Digital Networks that will be locally branded and customized for Chinese audiences.

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