Discovery Communications Fourth-Quarter Earnings, Revenue Rise

Discovery Communications

UPDATED: The cable networks company, led by CEO David Zaslav, posted higher advertising and affiliate fee revenue and exceeded Wall Street estimates.

NEW YORK - Discovery Communications reported improved fourth-quarter financials on Thursday that exceeded Wall Street expectations driven by higher advertising and affiliate fee revenue.

The cable networks company, led by CEO David Zaslav, posted earnings of $336 million, compared with $191 million in the year-ago period, or $194 million when looking at continuing operations. The figure for the latest quarter was up 71 percent over the year-ago period and exceeded the average Wall Street estimate of $272.5 million. It included $109 million in lower taxes primarily due to the recognition of foreign tax credits as a result of a reorganization of international operations, partially offset by a $20 million impairment charge related to our commerce operations.

Revenue rose 11 percent to $1.12 billion. Wall Street analysts had on average projected $1.11 billion. The firm recorded revenue growth of 11 percent at its at U.S. networks and 12 percent growth at its international networks.

U.S. advertising revenue increased 13 percent, or 17 percent when excluding Discovery Health from the 2010 figures because of its contribution to joint venture network OWN, with the company citing "higher pricing and increased sellouts." Affiliate fees came in 7 percent higher. In Discovery's international business, ad revenue jumped 18 percent, while affiliate fee revenue rose 10 percent.

"Discovery’s strong 2011 results and operating momentum exemplify the power and universal appeal of our non-fiction programming, as well as the opportunities inherent in the global distribution platform Discovery has built over the last 27 years," Zaslav said. "Heading into 2012 we remain focused on taking market share globally while delivering value to our shareholders through sustained financial results and capital returns.”

Zaslav was also upbeat about the outlook for ad growth in 2012 for Discovery as analysts have said recent ad trends at many other sector biggies have been weaker-than-hoped. U.S. ad growth is "off to a great start" this year with "a strong and steady scatter environment," Zaslav said. Overall, he predicted "solid ad growth in 2012."

Helping ad gains are continued ratings strengths across the company's networks, its early moves in the scatter market and ratings growth engine ID: Investigation Discovery. The network is the fastest-growing cable channel and was the company's biggest U.S. ad growth driver in 2011. Zaslav predicted further upside for ad rates and revenue this year. 
He also said Discovery has additional opportunities" to exploit the growing value of our content library" after striking a Netflix content licensing deal last year that makes content available with a delay of 18 months. Zaslav said there are no signs that the two-year deal has cannibalized TV viewership and added that Discovery is in talks with "a number of players" for similar deals.

Zaslav also predicted growth in affiliate fee revenue when key carriage deals with TV distributors start to expire later this year. Those deals could this time also include the TV Everywhere availability of Discovery content. "We are in discussion of what's the value" for that, the CEO said, adding that his team sees "substantial value" in that.

With Lionsgate looking at selling its 51 percent stake in the TV Guide Network, Discovery brass was also asked if they would be interested in buying such assets.
"We look at everything," especially if assets help the firm grow faster, Zaslav said. But he said the company would not comment on specific assets.


Twitter: @georgszalai