• by Wayne Friedman , August 4, 2009

Discovery Communications will follow other media companies' moves concerning the upfront sales process -- selling less commercial time this upfront period.

 

"We plan on selling less inventory than in years past," says David Zaslav, president and CEO of Discovery Communications, in a financial earnings call to analysts. "We believe holding back inventory is prudent."

"Scatter [pricing] is up versus upfront last year. The volume is still a challenge, and the visibility is still a change," says Zaslav.

Zaslav says the company is still in the middle of the upfront process, but that improved scatter pricing in the period versus the upfront the year before gives the company the hope of higher sales in the months to come.

In absolute total scatter dollars, Discovery says it is down in second-quarter 2009 versus scatter second-quarter 2008. Zaslav says Discovery Networks' programming is priced "at 30% discount to broadcast CPMs (cost per thousand viewer prices)."

In comparison to other media companies, Discovery Communications posted largely positive financial results in its second-quarter reporting period.

Net income more than doubled to $179 million from $82 million in the period before. Revenues were virtually the same versus second-quarter 2008, at $881 million. Discovery's U.S. Networks was its better-performing division, rising 2% to $557 million, coming from a 5% increase in distribution fees to $247 million and a small 1% rise in advertising revenue growth to $290 million. This came from higher pricing on increased ratings. U.S. Networks' operating income before depreciation and amortization (OIBDA) climbed 11%.

A key piece of U.S. Networks' performance was affected by the absence of $5 million in distribution revenue from the removal of Discovery Kids as a result of the 50% sale of the group to Hasbro in May of this year. Discovery Kids recorded an $8 million one-time item for the period. The network will re-launch in 2010.

Analysts were expecting earnings per share of 32 cents. Discovery delivered 43 cents per share. The company's stock has climbed over 80% in recent months.

All this was offset by lower results from Discovery's international division -- 5% lower in revenues to $283 million and a 5% drop in operating income (OIBDA) of $92 million.

Discovery Communications was structured in September 2008 out of the Discovery Holding Co. and Advance/Newhouse Programming Partnership. The two companies combined their stakes in the cable channels, creating the new publicly traded company.