Discovery CEO Touts Digital Licensing, Upfront Outlook, OWN Turnaround

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David Zaslav says the cable networks firm will use an option to extend a Netflix content deal and says OWN is on track to reach cash-flow breakeven.

Discovery Communications CEO David Zaslav on Tuesday touted the company's outlook for TV advertising upfront sales and digital licensing revenue.

During Discovery's first-quarter earnings conference call, he said the company will use an option to extend a current content licensing deal with Netflix for a third year. The firm said the option will be used in the current second or in the third quarter.

"We have seen no degradation in audience," Zaslav said about the effect of the Netflix deal on Discovery networks' ratings. "They like our content, we like this window," he said when asked whether Netflix's new selectivity in renewing content licenses concerned him. "We have a lot of good stuff, so I think we will do well."

He also said that Discovery has been talking to a lot of U.S. pay TV operators and expects that at least some of them will launch their own streaming video offers, which would mean Discovery gets paid extra for content it makes available on those platforms.

Asked about the upfront, Zaslav said he hopes for it to be "robust" and predicted Discovery would see "significant increases."

He also lauded the continuing ratings improvements at OWN, a joint venture channel with Oprah Winfrey's Harpo, saying that his company is on track to reach cash-flow breakeven for the network in the second half of the year.

Discovery CFO Andy Warren on the call lauded OWN's "significantly improved results."

OWN was up 3 percent in the key demo of women 25-to-54 despite a tough year-ago comparison because of an interview with Whitney Houston's daughter, which drew a record audience. In April, OWN grew 9 percent thanks to such new hits as Life With La Toya, and the channel was a top 10 performer among all cable networks on Saturday nights in the key demo, Zaslav said. Without Oprah on Saturday, "it's a great achievement," he said.

Zaslav on Tuesday also touted the continued ratings gains for key Discovery networks, including Animal Planet, which has now seen 16 consecutive months of growth, Destination America, which the CEO said is "quickly becoming a lifestyle destination," and Velocity, which saw more than 50 percent viewership growth. Also, kids joint venture network The Hub grew its ratings for kids 2-11.

Overall, Zaslav expects Discovery will be able to further narrow the ad-rate gap with broadcast networks over the coming years. "It will never be even," he said, but added: "We will get that pickup."

Discussing Discovery's international business, Zaslav reiterated that his team was more likely to make further acquisitions there than in the more mature U.S., where he likes the company's scale.

After the close of the acquisition of SBS in Scandinavia and a stake in Eurosport, "we are just beginning to scratch the surface of opportunities" of these deals, Zaslav told analysts.

With double-digit growth in many international markets, including gains in Italy, Spain, Russia and South Africa, Discovery is set for even more upside once economic challenges end. "If Western Europe turns, that's going be the real fuel for extraordinary growth for us," he said, highlighting that many countries in the region have been in recession or seen flat economic trends.

Twitter: @georgszalai