Discovery CEO: European Deals to Boost Earnings, International Growth

 

Two big European acquisitions will be add to Discovery Communications' earnings and accelerate the international growth of what is already the world's leading pay TV programmer outside the U.S., CEO David Zaslav said Friday. And they will for the first time add sports and scripted programming to the company, he highlighted, while emphasizing Discovery wasn't planning to become a player in U.S. sports.

On a conference call following news that the cable networks company would acquire the Scandinavian assets of German TV giant ProSiebenSat.1 in a deal worth $1.7 billion and that it would soon finalize a $240 million investment into French broadcaster TF1 soon, he said the deals will give the company an opportunity for "strong, sustainable growth."

As the biggest pay TV business outside the U.S., Discovery now has 153 channels in 217 countries with more than 1.8 billion subscribers. Zaslav said Discovery is "unique among media companies," highlighting that it owns nearly all of its content, allowing for a global self-syndication system.

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While other entertainment conglomerates, such as Time Warner, have shut down some international channels, Discovery has continued to grow overseas. Zaslav said TLC is now in 150 countries and has more than 300 million subscribers worldwide, making it the number one female TV lifestyle brand in the world. Overall, five of the company's networks are now in over 100 countries, an international ratings are up more than 25 percent over past year, Zaslav said.

He also said that international revenue will continue to rise at Discovery from 10 percent of total revenue a few years ago to more than a third now and even more in the future. The deals "will help us to grow faster," Zaslav added without providing specifics.

Zaslav and Discovery Networks International CEO Mark Hollinger wouldn't say when the company's international revenue could overtake U.S. revenue. "The U.S. is still growing very nicely" and has "sustainable growth" left in it, Zaslav said. "But we love the idea that we have diversified outside the U.S. and will continue to grow faster than in the U.S. and will accelerate" with the deals.

Hollinger said it was hard to say when exactly international could become bigger than the U.S. business of Discovery, highlighting that there is a "friendly rivalry" between the U.S. and international teams.

Asked if Discovery would hunt for further international deals, Zaslav said it would "remain opportunistic," but it wasn't easy to find acquisitions that ensure accelerated growth.

Discussing TF1 and its Eurosport sports network, Hollinger and Zaslav mentioned its presence and further upside in Asia and its potential for growth in other regions. They didn't share plans for a possible U.S. expansion, but emphasized that Eurosport focuses on popular sports like tennis and ice skating, for which lower fees can be paid than for big U.S. sports. Plus, it shows the German soccer league Bundesliga outside of Germany where it is also cheaper.

"The U.S. sports TV business is a totally different business," Zaslav said. "I do not see us getting into [writing] big checks."

In another genre expansion, the ProSieben Scandinavian assets will be Discovery's first significant foray into scripted content, Zaslav said, calling this "an important day" for the company and its future.

Email: Georg.Szalai@thr

Twitter: @georgszalai

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