Discovery Q4 Ads Record Small Uptick

Discovery Inc. witnessed its stock take a steep dive -- nearly 10% -- on Monday in response to comments at industry event by its CEO concerning ratings and advertising.

Discovery’s stock closed off 8.2% to $28.20.

At a UBS media conference on Monday, David Zaslav, president-CEO, Discovery, said advertising is lower than expected in the current quarter period: "We had said we would be [up] three to five [percentage points]. And I think we're going to be a little less than that."

He added that Discovery is expected to be up 2% to 3% in U.S. advertising for the period. U.S. distribution revenue is now expected to be up 1% versus an earlier flat projection

Zaslav pointed to recent lower ratings as the main reason -- especially at the Discovery channel -- for the current situation. Some of this has to do with production problems around its highly rated car/garage reality show “Fast ‘N Loud.” It won’t be coming back until early next year.



On the positive front, other channels -- including Food Network and HGTV -- are doing well. “We are getting over-delivery on the women’s [targeted] networks. It is a really good thing. But we are not getting the extra value; we sold [to advertisers] at a number that was a little less than we are delivering now.”

On the U.S. distribution revenue front, Discovery will see strong revenue hikes for next year with the growth of virtual pay TV providers. Sling TV and Hulu should add around 4 million subscribers to a number of Discovery channels, he noted.

“Skinny bundles will continue to ameliorate some [traditional pay TV] subscriber decline,” says Zaslav. “In the U.S., we said we would see mid-single affiliate growth next year, which will be a nice accelerator for us.”

MoffettNathanson Research had estimated Discovery’s advertising fourth-quarter revenue to be $1.6 billion (and $5.5 billion for the entire 2018) with distribution revenue to be $1.1 billion for the fourth quarter and $4.5 billion for 2018.

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