Discovery: Ad Sales Up 2%, Future Partnership Under Review

Discovery Communications is examining other partnerships for its emerging networks -- similar to the separate deals it made with Oprah Winfrey and Hasbro.

As it did with Discovery Health -- soon to be converted to the Oprah Winfrey Network -- and its recent deal with Discovery Kids and Hasbro, questions arose during the company's first-quarter earnings call about Discovery's other networks. The emerging channels in question: FitTV, Military Channel, HD Theater, Planet Green, and Investigation Discovery and Science Channel.

David Zaslav, president/CEO of Discovery Communications, says the company is looking at each channel and "trying to determine what they are when they are at their best. Do we need one to get a bigger voice in the market?

"Fit TV and Military [Channel] are profitable right now. We are not in any hurry to do any conversions," he adds. "Our first focus would be to grow these ourselves. We are a strong creative company."

For the first quarter of 2009, all Discovery Networks eked out a gain in U.S. advertising sales -- a 2% gain to $244 million. The bulk of these gains continue to come from the company's big three networks: Discovery Channel, TLC and Animal Planet.

Better results came from networks affiliate fees: an 11% gain to $248 million. Overall, total revenues were up with its U.S. networks -- 5% to $509 million.

Distribution subscriber revenue grew primarily for Discovery networks because of additions to cable operators' digital tier programming packages. Advertising revenue climbed from higher pricing and increased ratings. On the downside, Discovery said there were lower overall cash advertising sellouts due to softness in the economy.

It was a different story abroad -- in part because of unfavorable currency exchange rates. Advertising revenues were down 12% to $57 million and distribution subscriber fees slipped 1% to $177 million. Revenues were down 4% to $255 million.

Overall revenues for Discovery Communications were at $817 million for the quarter versus $809 million. First-quarter net income was $119 million compared to $34 million.

Concerning the upfront market, Zaslav said: "It really is an odd market. You don't have the ability to see very far forward. The truth is, we really don't have a sense of the upfront. There is no transparency."

Zaslav reiterated that the second-quarter options at Discovery were on the high side -- as it was other media companies -- at around 13% to 14%. Company officials say inventory sold in the second quarter has been priced slightly higher than the upfront deals made last June.

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