Advertising "Coming Back Faster" Than Expected: Discovery CEO

President and CEO, Discovery, Inc. David Zaslav - Getty - H 2020
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Discovery CEO David Zaslav

CEO David Zaslav tells a virtual Credit Suisse investor conference that ad trends are better than initially expected amid the novel coronavirus pandemic. "In the U.S., things are getting better," he said.

Advertising spending trends are improving after the initial novel coronavirus pandemic hit, with money "coming back faster" than initially expected, Discovery president and CEO David Zaslav told an investor conference Tuesday.

"In the U.S., things are getting better," with advertising scatter market trends "improving" and cancellations looking "much better than we thought" for the third quarter, he said. Meanwhile, the ad market outside the U.S. has been "pretty tough, but it is getting better," with sequential trends improving "in a meaningful way," except for Latin America. 

Discovery management previously said its U.S. TV advertising revenue was trending down 20 percent in April, while May and June were looking somewhat better at the time. On Tuesday, Zaslav said that Discovery's April came in down 18 percent from the year-ago period. "May and June look to be better, significantly better," he said, adding that market sentiment feels "good."

Zaslav said advertising trends are the top issue he gets asked about by investors these days, and currently trends look better than his team and others had forecast in the early days of the pandemic. But "we don't have a lot of visibility" beyond the near-term, and the way things play out will depend on whether there are any second waves of the pandemic in the different regions of the world, he said.

The Discovery boss spoke at the Credit Suisse 22nd Annual Virtual Communications Conference in a session that was webcast. During the session, he again touted the firm's lifestyle networks as "the new sports." He noted that some of Discovery's audience share figures have been well ahead of broadcast networks.

In early May, Discovery reported better-than-expected first-quarter earnings and unchanged U.S. advertising revenue, which during the back half of March started seeing the first effects on TV advertising from the novel coronavirus pandemic. 

The company also said back then that it had amended provisions in credit agreements "to preserve flexibility" amid pandemic uncertainty and pursued "cost savings initiatives."

Discovery's financial hit in the first quarter from the pandemic seemed minimal in terms of U.S. ad revenue, while its international operations were more affected given that the pandemic started in Asia and the firm's European businesses include sports, which have been put on ice in most countries due to the outbreak. International revenue decreased 3 percent, with the company noting "the impact of COVID-19 in key advertising markets" and "the discontinuation of certain pay TV distribution agreements in the Nordics" as factors.

Discovery had on March 24 withdrawn its 2020 financial guidance due to the pandemic, warning of "unprecedented economic uncertainty" and highlighting the "unknown impact" of the pandemic on its financial results. It mentioned the Tokyo Summer Olympics postponement to 2021 as one pandemic result affecting future results. The firm also revealed it had drawn down $500 million from a revolving credit facility to shore up its balance sheet.