Discovery CFO Talks U.S. Ad Growth, International Acquisitions
Discovery Communications CFO Andrew Warren on Tuesday discussed the cable networks company's acquisitions strategy and why deals are likeliest to come abroad.
At an investor conference in San Francisco, he also reiterated past comments from management that after a fourth-quarter U.S. advertising gain of 4 percent, first-quarter growth is set to accelerate. "The U.S. ad sales market is healthy," Warren said, adding that the Sochi Winter Olympics had less of a negative effect on it than industry observers had feared.
Speaking at the Morgan Stanley Technology, Media and Telecom Conference in San Francisco in a session that was webcast, he was also asked if Discovery prefers to make acquisitions in the U.S. or abroad, to which the CFO said the company is mostly targeting international opportunities.
"To us, in the U.S., scale is important," and the company's scale today is "excellent," Warren said. He added that getting financial returns on deals in the U.S. is more difficult.
Internationally though, there are regional opportunities to boost Discovery's scale. "We look at it very much on a market-by-market basis," Warren said. He didn't speak about Britain's Channel 5 or other specific deal possibilities.
Last week, Discovery made an initial bid for U.K. broadcaster Channnel 5. The company has mostly been expanding in Europe, buying SBS in Scandinavia and acquiring a majority stake in pan-European sports network Eurosport International.
But Warren did address the free-to-air opportunities abroad compared to Discovery's traditional pay TV focus. He said that in select markets the company has acquired free-to-air networks, saying that strategy works well in markets where Discovery has strong existing content and feels it can "nourish" a bigger audience.
Asked about the SBS deal, Warren said that ad sales, affiliate fee and cost synergies have so far exceeded expectations. And content synergies, from being able to use Discovery's library content instead of buying or producing new content, have also turned out to help by slowing programming expense growth, he said.
Warren also emphasized again that the Eurosport deal doesn't mean that Discovery will become a major sports player in the U.S. He said the company's decisions to broaden its programming beyond its traditional non-fiction focus are based on specific regional or local market opportunities.
Discussing the growth outlook in Western Europe, Warren said he expects continued sustained gains in the region driven by rising advertising sales and "pay TV getting a bigger share of wallet."