Discovery CFO Touts Skinny Pay TV Bundles

Andrew Warren - S 2016
Courtesy of Discovery

Andrew Warren - S 2016

Andy Warren also says OWN is "doing extraordinarily well" with growing cash flow and comments on overall financial trends.

Discovery Communications CFO Andy Warren told an investor conference on Thursday that he was bullish on the performance of Oprah Winfrey joint venture network OWN and said he would "welcome" skinnier pay TV bundles.

Speaking at the Bank of America Merrill Lynch 2016 Media, Communications and Entertainment Conference in Beverly Hills in a session that was webcast, he argued that any skinny pay TV bundle would want to include Discovery's top six networks. “I welcome a skinnier bundle," and if that ends up being the way the business goes, Discovery could make more money in the U.S., Warren said. "It could be incredibly accretive."

He added that the company was “open to a skinnier bundle if the economics are right” and the bundle makes consumer sense. Warren explained that a cheaper skinnier bundle could help attract the 35 million U.S. households without pay TV subscriptions. Discovery has said that 85 percent-plus of its affiliate financials come from its top six channels, and that percentage will only grow in the coming years.

Some analysts have suggested that at least some entertainment companies will in the coming years decide to shutter or sell smaller, worse-performing networks to focus on their top brands.

But Warren highlighted that all U.S. carriage deal renewals have been for all 13 company networks. The most recent carriage renewal with AT&T DirecTV includes carriage of key networks on upcoming streaming service DirecTV Now, which will launch in the fourth quarter. “We’ll also be front and center on DirecTV Now,” the Discovery CFO touted.

Warren on Thursday also lauded the success of OWN, saying it will make more than $100 million in cash flow this year, with all that flowing to Discovery and that figure accelerating thanks to ratings and advertising sales gains. Touting the network as likely "the most productive joint venture I have ever been a part of," he said that on a scale from 1 to 10, OWN was "probably a 12" as it is "just doing extraordinarily well." The exec touted the success of its recent dramas and said that everything Winfrey touches turns into gold.

Asked about his financial outlook for 2016, Warren said results would be in line with or stronger than Discovery had said on its most recent earnings conference call.

He touted sustained international affiliate growth ahead and flat to slightly down non-content costs, while the company was increasing its content spending by about $150 million this year.

Warren reiterated that the Brexit, the Summer Olympics in Rio de Janeiro and the Euro 2016 soccer tournament would be a drag on third-quarter results, but wouldn't give full details beyond saying that international advertising would be up slightly to flattish in the quarter.

Asked about some U.S. ratings challenges, the Discovery CFO said that non-fiction content's vitality remained “as real now as ever.” While OWN and ID have seen growth, he acknowledged that TLC continues to have challenges. But the company continues to “put effort and money behind” strengthening its performance, he said.