Discovery CEO Talks Ad Outlook, Benefits of "On-Brand" Shows

Discovery Communications

David Zaslav also discusses carriage-deal renewal talks with Comcast and the concerns he raised about its planned Time Warner Cable acquisition, saying "that's all behind us now."

Discovery Communications CEO David Zaslav on Tuesday discussed the company's advertising outlook, including for this year's upfront ad market, and said a focus on "on-brand" programming has helped reinvigorate ratings at the flagship Discovery Channel.

On the company's quarterly earnings conference call, he also discussed carriage-deal renewal talks with Comcast and the cable giant's failed Time Warner Cable acquisition as Discovery also outlined its latest expectations for the impact of currency woes onto its 2015 financials.

Zaslav said he was "very pleased" with Discovery's "up close and personal" upfront presentations that replaced the traditional big events, saying the firm got "enthusiastic" feedback. While it was too early to forecast Discovery's upfront performance, he said he felt "confident" as the company was "well positioned" for the upfront market, adding it has already sold about 30 percent of its upfront inventory so far.

Given the company's ratings momentum, he said that if ad volume picks up, Discovery stands to benefit. "We assume it stays tepid," he said about the ad market, though. "It has been slightly better.... We are not getting excited."

Zaslav also lauded Discovery's ratings growth under new boss Rich Ross. Asked why the network has been on the rise, the CEO said Discovery and Science have both benefited from more on-brand shows. "That pivot to being on-brand is really helping us," he said.

Asked if he expects Discovery to increase its scripted content and whether that would boost content costs, Zaslav said, "We don’t see a significant increase in investment," but a focus on blue-chip content. "We think we can do scripted in a much more efficient way," given Discovery's focus on long-form programming and its ability to share it around 230 countries. CFO Andy Warren echoed that, saying the company continues to expect low to mid single-digit content cost growth in the U.S., below its international growth.

Zaslav also said that Ross and new Discovery Channel head of documentary programming John Hoffman are looking at what he called the "Hello World" initiative. They would work with producers and musicians "to create a refresh of a lot of the fantastic content we have," he explained, as some of it feels a bit dated.

Zaslav had in the past spoken out against Comcast's planned acquisition of Time Warner Cable, which the cable giant recently abandoned amid regulators' opposition. Asked Tuesday if he expected his position to affect Discovery's ability to reach a carriage-deal renewal when the companies' current arrangement expires mid-year, Zaslav acknowledged that the firm had some concerns about the mega-deal, but added, "that’s all behind us now." He emphasized that he had "great respect" for Comcast chairman and CEO Brian Roberts, Comcast Cable boss Neil Smit and NBCUniversal CEO Steve Burke. He called them "very effective" and said they "run a great company." And, Zaslav said, "we have always managed to work together."

The CEO added that he would see Smit later in the day at the annual NCTA Cable Show in Chicago and also saw him Saturday night. "We have plenty of time" and both sides are "very hopeful" about reaching a new deal, Zaslav said. He added he was "confident" the two firms could reach a deal that is fair and valuable for both. "The goal now is to find a deal that makes sense for both of us," he said.

Warren on Tuesday said Discovery continues to expect a $50 million negative revenue impact in 2015 from Russia, where the company has been affected by regulatory changes and a weak ruble.

He reiterated that full-year profitability would take a $150 million hit from currency woes as "the currencies continue to move against us." But with the dollar having further strengthened since the last call, he increased the expected foreign exchange hit to Discovery's 2015 revenue from $350 million to $425 million. However, he emphasized that the company's hedging strategy is working.

Twitter: @georgszalai