Discovery Grows Ad Sales 5%

Discovery Communications posted a third-quarter net profit of $101 million, or 22 cents a share, down 25 percent from $134 million, or 44 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 5 percent to $522 million, on proportionate gains in advertising and affiliate revenue.Ad sales dollars increased 5 percent to $261 million, eclipsing analysts’ expectations of 1 percent to 2 percent growth. Affiliate revenue also grew 5 percent versus the year-ago period, with distribution dollars adding up to $242 million in Q3.Discovery credited the lift in ad sales revenue to improved ratings. Per Nielsen live-plus-seven-day estimates, Discovery Channel saw its prime-time delivery of viewers 18-49 increase 7 percent in Q3, as the network averaged 660,000 members of the core TV demo. Jon & Kate Plus 8 juiced TLC (562,000 viewers 18-49, up 30 percent year-on-year), while Animal Planet’s less-cuddly programming lineup helped boost ratings 19 percent to 235,000.Results were partially offset by lower sellout and pricing, due in large part to the faltering macro-economic climate. Q3 upfront cancellations came in at around 14 percent.Sequentially, Discovery’s ad sales revenue fell 10 percent from its Q2 ‘09 take ($290 million). On the affiliate side of the ledger, distribution gains at the digital networks (Investigation Discovery, Science Channel, etc.) were offset by the deconsolidation of the Discovery Kids network, which eliminated approximately $10 million in carriage fees.Discovery president and CEO David Zaslav told investors that upfront pricing was down slightly, adding that the ad sales team sold “10-15 percent less inventory than in previous years.” Zaslav said the pullback had less to do with weakening demand than a belief that Discovery would be able to command better pricing in scatter.Presently, Q4 scatter pricing is up by high-single to mid-teen percentages over upfront rates, although Discovery chief financial officer Brad Singer was quick to note that business was nowhere near as robust as it was a year ago, when the Discovery nets commanded 20-30 percent premiums. Looking ahead, Singer expects Q4 ad sales revenue to come in “flat to slightly positive” versus the prior-year period, when Discovery took in $282 million.Discovery’s results reinforced early hopes that the ad market has begun to rebound. Earlier today, Cablevision reported that its Rainbow programming division, which includes AMC, IFC, WE tv and Sundance Channel, saw ad sales revenue soar 18.2 percent versus Q3 2008.Zaslav did not offer further information on the delayed launch of OWN: The Oprah Winfrey Network, which it first introduced to investors January 2008. Singer said OWN would launch sometime next year and that Discovery would invest between $40 million-$50 million in the startup, a joint venture with Winfrey’s Harpo Productions.Over the last 12 months, Discovery shares have doubled in value. In late trading Tuesday, shares were up 1.75 percent to $28.50. On Nov. 4, 2008, Discovery shares closed at $14.05.

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Discovery Grows Ad Sales 5%

Anthony Crupi

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