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Discovery reports Q1 profits dip, braces for potential steep ad revenue drop in 2020

Discovery, Inc. is reporting a marginal 1% decline in revenues to US$2.68 billion for the first quarter as the media conglomerate braces for ad revenues to take a steep tumble in ...
May 6, 2020

Discovery, Inc. is reporting a marginal 1% decline in revenues to US$2.68 billion for the first quarter as the media conglomerate braces for ad revenues to take a steep tumble in 2020, amid the global impact of the coronavirus pandemic.

The company said Wednesday (May 6) it did not incur “significant disruptions” in Q1 as a result of the COVID-19 pandemic, but is pursuing a number of “cost savings initiatives” in the first quarter of 2020 to offset losses.

Those measures include the implementation of travel, marketing, production and other “operating cost reductions.”

Discovery is anticipating its advertising revenues — which represented 54% of its consolidated revenues in 2019 — to decrease “significantly” through the remainder of 2020 if partners in certain sectors (such as travel) scale back ad spending, or if the media company is unable to air new content due to production shutdowns and delays.

“As we navigate through the remainder of 2020, our priority remains on the well-being of our employees, clients, customers, and production partners. Furthermore, we will continue to focus on maintaining a healthy balance sheet with robust liquidity and investing in our businesses to position ourselves for long-term growth amid the changes in the pay-TV landscape,” David Zaslav (pictured), president and CEO of Discovery, said in a statement.

Revenues for U.S. networks were consistent with the prior year quarter at $1.75 billion, while advertising revenues were flat and distribution revenues increased 2%.

Total portfolio subscribers for March 2020 were 6% lower than March 2019, while subscribers to the fully distributed networks were 4% lower.

Revenues for the international networks segment decreased 3% compared to the year-ago quarter, landing at $923 million.

International advertising revenues remained unchanged, and distribution revenues for the segment increased 1%.

Discovery said it is unable to predict the full impact the pandemic could have on its financial standing due to the “speed with which the COVID-19 situation is developing.”

In a March 24 filing with the U.S. Securities and Exchange Commission, Discovery said it would be withdrawing its fiscal 2020 outlook following the postponement of the Olympic Games to 2021 and the “economic uncertainty” caused by the ongoing COVID-19 pandemic.

A few weeks earlier, on March 12, the company drew down $500 million from its $2.5 billion credit facility to “increase its cash position and maximize flexibility.”

In addition to other measures to “preserve flexibility,” Discovery said in its Q1 update it had reached an agreement with its lender group, Bank of America, April 30 to “amend certain provisions of its revolving credit facilities.”

The media giant most recently announced a slate of lockdown-friendly content as its third-party production partners were forced to shut down in the first quarter of 2020 to prevent the spread of the novel coronavirus. The network group has also seen significant ratings increases over the course of the past month for various nets in its portfolio — most notably, TLC, HGTV and Food Network.

About The Author
Jillian Morgan is a special reports editor at realscreen with a background in journalism and digital marketing. She joined the publication in 2019 after serving as the assistant editor to trade publications HPAC and On-Site. With a bachelor of journalism from the University of King's College in Halifax, she also works as a freelance writer and fact-checker.

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