Higher ratings and better-than-expected ad sales have forced one stock-market analyst to raise its projections for Discovery Communications. But long-term, the network still has challenges.
Merrill Lynch has raised the company's rating to "neutral" rather than "buy." For the summer ratings, Discovery was up 20%, and TLC was up 33%. Shows such as "The Deadliest Catch" and "Dirty
Jobs" did well for the flagship network. For TLC, improving shows included "Miami Ink" and "Little People, Big World."
Still, overall ratings for the network group were flat in the broadcast
2005-2006 from the year before.
For the third quarter 2006, Merrill now says Discovery will bring in $293 million, which would be up 2% from the same period a year ago. For the year, Merrill hiked
its numbers to $1.27 billion in advertising sales, which would be a 7% improvement over 2005.
Subscriber fees are still projected to grow at a faster rate than advertising sales: $345 million or
14%, versus the third quarter 2005; and $1.41 billion or 17%, versus the entire year 2005.
advertisement
advertisement
Merrill has Discovery's ad sales rising by 6% in 2007 to $1.35 billion, and 14% for subscriber fees to
$1.61 billion.
But Merrill isn't fully behind Discovery just yet.
Discovery Communications still seeks a replacement for CEO Judith McHale, who will retire at the end of this year. Merrill
also worries that the company's substantial investments in its Education & Commerce division will bring big operating losses. It adds that deteriorating fundamentals for its core businesses offer no
near-term positive boosts in revenue performance.