Discovery TV Networks Post Small Ad, Distribution Gains

Discovery had a solid first-quarter -- with and without its Scripps Networks Interactive acquisition -- yet it also witnessed some slowing of domestic affiliate revenue.

Discovery’s first-quarter revenue rose 43% to $2.3 billion. Excluding the Scripps purchase, The Enthusiast Network and OWN, the Oprah Winfrey Network, as well as foreign currency transactions, revenues rose 14%.

But looking at individual TV network groups' year-to-year advertising growth, Discovery networks were up 4%; Scripps’ growth would have dragged that down to a 2% gain.  

Analyzing only Discovery's year-to-year distribution revenue growth, it improved 2%. Factoring in Scripps distribution revenue growth would have given it the same 2% rise. While revenues grew, the company says it was “partially offset by a decline in affiliate subscribers.” It did not offer details.

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Todd Juenger, senior research analyst at Bernstein Research, says: “Domestic affiliate fees sequentially decelerated for the second quarter in a row. The progression (for Discovery) for the past three quarters has been [gains of] 5.5% (including some SVOD one-timers), 3%, 2%. Pro forma, including Scripps, was also 2% higher.”

Net income was just $3 million down from $221 million in the first quarter a year before. Results were better than expected. Mid-Tuesday morning, Discovery stock was up 6% to $24.75.

U.S. Networks were up 42% in revenue to $1.2 billion, adding in Scripps revenue for the quarter. Advertising was $627 million; distribution revenue, $514 million.

International Networks grew 47% to $1.1 billion. Without Scripps and foreign-currency changes, it was 28% higher — with 10% gains in distribution and 11% improvements in advertising.

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