Discovery Rejects Some Upfront Dollars

David Zaslav of Discovery

Discovery Communications CEO David Zaslav said Wednesday that the company opted to turn away upfront business and roll the dice on the scatter market, dropping its sellout rate by 5% to do so.

"There was an opportunity for us to have booked more," he said at an investor event.

The company sold 45% of inventory, down from 50% in 2008. CPMs were down in the low single digits, estimated to have fallen in the 2% to 4% range.

Zaslav said the scatter market is improving -- fueling optimism that selling less upfront inventory will prove prescient. Still, scatter continues to be unpredictable as advertisers are making decisions so close to launch date -- "a week-by-week game," Zaslav said.

"For the last couple of weeks, we've been doing well ... [but] as much as each week seems a little bit better, there's still a chance that we could come in two weeks or three weeks, and it just wouldn't be there," he said.



Prime-time ratings have been rising at flagship Discovery and TLC networks, and could help offset any soft scatter business. By one measure, in the 18-to-49 demo, the channels are up 6% and 11% over the September 2008-August 2009 period, respectively. Animal Planet rose 20%.

Growing Animal Planet -- which is in 96 million homes -- has been a focus for Zaslav -- who said when he arrived at Discovery several years ago the network was making "hardly any money," but should have been making up to $300 million a year. Animal Planet now has its own sales team.

"If we could figure out the right recipe, [it] could really work," he said, although to secure impressive profits will take a journey of two or three years.

Discovery, where Zaslav recently signed a contract extension through 2015, is one of the more muscular media stocks -- trading Wednesday at $29.44 a share, just 31 cents beneath a 52-week high.

The network has been searching for ways to boost distribution and revenues for its lesser-distributed, so-called digital networks. "We're taking some swings," Zaslav said.

The would-be 2010 launch of the Oprah Winfrey Network is also a much-anticipated effort -- as is a joint venture on a kids' channel with Hasbro, which has guaranteed Discovery $25 million in merchandising revenue. "They have some very strong brands in "Transformers," "G.I. Joe," "Mr. Potato Head" and a great ability to market us in stores," he added.

Believing there is a dearth of crime and investigative programming, Investigation Discovery has been a point of emphasis with ex-CourtTV head Henry Schleiff now in charge.

Separately, while re-acquiring the Travel Channel might seem attractive to Discovery, Zaslav said tax issues will keep the company out of the bidding process. But depending on the acquirer, Discovery could continue to serve as an agent in selling ads and negotiating affiliate deals.

Next story loading loading..