2nd UPDATE: Discovery Communications 1Q Net Soars On Ad Sales Jump
April 28 2011 - 11:20AM
Dow Jones News
Discovery Communications Inc.'s (DISCA) first-quarter profit
nearly doubled on continued growth in U.S. and international
advertising and affiliate sales, as well as a $102 million gain
tied to the company's 50-50 joint-venture with TV star Oprah
Winfrey on her branded cable network.
On a conference call with analysts following its release,
Discovery Chief Executive David Zaslav said recent strength in the
TV advertising business remains in place as the company moves into
its key ad sales season, known as the upfront, and he expects
"significant increases."
The cable network owner, home of hit shows like "Deadliest
Catch" and "Storm Chasers," raised its full-year revenue forecast
to a range of $4.03 billion to $4.13 billion from its previous view
of $4 billion to $4.1 billion. The new outlook brackets the average
estimate of analysts polled by Thomson Reuters.
Class A shares of Discovery recently rose 2.8% to $43.59. The
stock has gained over 17% over the past year.
Discovery has been revamping its portfolio of cable networks to
attract a larger audience in hopes of driving advertising growth
and to put the company in a stronger position to negotiate
affiliate deals with distributors. Cable networks have generally
been gaining audience share from broadcast networks and according
to Standard & Poor's Ratings Services, Discovery's new
programming has attracted higher audience ratings on the company's
main U.S. channels over the past few years.
The company launched its Oprah Winfrey Network, or OWN, in
January, and earlier this month said it would bulk up the channel
with six new series, in an attempt to boost lagging prime-time
viewership.
Zaslav acknowledged Thursday that early audience ratings for OWN
have been a disappointment, but he noted much of the key
programming that is expected for the channel--like a talk show
starring Rosie O'Donnell--has yet to air. Advertisers are still
enthusiastic about the venture's potential, he said.
"It has been a slower start," said Zaslav. "This is a long-term
play building a channel. It's going to take us a while and we're
committed to it."
The company invested $57 million in OWN in the first quarter
alone, and Chief Financial Officer Brad Singer said he expects the
company will invest more than in the network than its latest total
estimate of $215 million.
On Thursday, Discovery posted quarterly profit of $305 million,
or 74 cents a share, up from $169 million, or 39 cents a share, a
year earlier. Revenue jumped 9.4% to $951 million.
Analysts surveyed by Thomson Reuters projected a profit of 47
cents a share on revenue of $938 million.
Discovery's sales in the U.S. grew 7.5%, driven by a 9% jump in
ad revenue, while distribution revenue increased 5.8%. Excluding
Discovery Health, which was replaced at the beginning of the year
by OWN, ad revenue climbed 15% in the U.S.
The company's international networks, widely viewed as a key
growth opportunity for the company, posted a 14% jump in sales on
24% improvement in ad sales and an 11% increase in distribution
revenue.
Discovery is part-owned by Liberty Media Corp. (LINTA, LCAPA,
LSTZA) Chairman John Malone.
-By Nat Worden, Dow Jones Newswires; 212-416-2472;
nat.worden@dowjones.com
(John Kell contributed to this story.)
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