Discovery Sees Sales Soar

Discovery Communications practically doubled its third-quarter profit, posted earnings of $186 million, or 43 cents a share, up 98 percent from $94 million, or 22 cents a share, in the year-ago period.

Revenue at the company’s domestic networks group, which includes the flagship Discovery Channel as well as Animal Planet and TLC, grew 11 percent to $585 million, on proportionate gains in advertising and affiliate revenue.

Ad sales dollars increased 16 percent to $304 million, a performance that was fueled by higher CPMs, improved ratings and greater volume. Affiliate revenue improved 9 percent versus the year-ago period, with distribution dollars adding up to $264 million in Q3. (Sequentially, Discovery’s ad sales revenue dipped 8 percent from $329 million in Q2 2010.)

Per Nielsen live-plus-seven-day estimates, Discovery Channel saw its prime-time delivery of viewers 18-49 increase 10 percent in Q3, as the network averaged 731,000 members of the core TV demo. TLC was flat in the demo, averaging 568,000 viewers 18-49, while Animal Planet continued to grow in prime time, averaging 269,000, up 14 percent versus Q3 2009. The three networks saw similar patterns in the 25-54 demo.

Discovery chief financial officer Brad Singer told investors that improved ratings accounted for around one-third of Discovery’s ad sales gains, while chief operating officer Peter Liguori noted that the cable channels have been able to take advantage of declining broadcast ratings.

“You look at the weakness of the broadcast networks, and clearly there is an audience to be gathered by the likes of us,” Liguori said. “And with the female viewing segment, clearly TLC and Investigation Discovery have helped fill the void.” Along with network dollars, Discovery has also won market share from “the Lifetimes of this world,” Liguori said.

Thanks to the continuing strength of the advertising market, Discovery raised its full-year outlook, saying it expects total revenue could reach $3.8 billion, up from an earlier outlook of $3.7 billion. Profits are expected to range between $650 million and $700 million.

Liguori spoke briefly about the upcoming launch of OWN: The Oprah Winfrey Network, and while he didn’t offer any targets for the startup, he did say he expects to double Discovery Health ratings in the early going. OWN bows on Jan. 1, 2011, taking over the 80 million household footprint currently occupied by Discovery Health. (Per Nielsen, DHLT averaged 110,000 viewers in prime in Q3, flat versus the year-ago period. Total-day deliveries averaged out to 149,000 viewers in the period, an increase of 8 percent. The network’s top demos are viewers 18-49, adults 25-54 and women 18-49 and 25-54.)

“We’re seeing extremely robust ad sales scheduled with OWN,” Liguori said, adding that the channel has lined up “deep commitments from blue-chip advertisers.” The majority of these multiyear sponsor deals include robust integration opportunities, which Liguori characterized as “a hedge against the daily variance of ratings.”

Discovery president and CEO David Zaslav added that his team is “very optimistic” about OWN’s prospects, telling investors that the startup will stand out because its original content and “the great Oprah brand.”

In after-hours trading Tuesday, shares were down 3.35 percent to $43.00.