Discovery Doubles Earnings From Continuing Operations

While media conglomerates struggle with weak advertising revenue, how to monetize the shift of consumers online, and declining DVD sales, more focused media plays are thriving.


Discovery Communications this morning reported that its earnings from continuing operations doubled from the year-ago quarter to 32 cents a share. Including a net tax gain of $46 million from selling half of Discovery Kids, earnings per share quadrupled.

Discovery is getting it right when it comes to both its revenue streams, advertising and cable subscriptions. CEO David Zaslav pointed out that the company is continuing to steal marketshare from its competitors. Ratings across the company's channels grew 12 percent, surely grabbing viewers not just from other cable channels but also from the broadcast networks. International subscribers grew 11 percent. Even ad revenue, which is suffering a decline across the board, managed a 1 percent gain in the U.S.

What does Discovery's performance tell us about the ad market?

Zaslav says that advertisers are buying spots closer and closer to airtime, sometimes just days in advance. Discovery, like many other broadcast and cable networks, will hold back more of its advertising to take advantage of the last-minute trend. The company says that pricing in this last-minute scatter market is up from last year, but volume is still a problem as marketers remain cautious.

What we're really seeing is the success of Discovery's model. The fact that its networks aggregate all sorts of non-fiction content allows them to reuse content across networks. (Take a look at Shark Week.) And shows like "Jon & Kate plus 8" on TLC have been so successful they've given ratings and ad prices at the whole network a boost. The company has also been able to manage its costs in a meaningful way. Next up is the Oprah Winfrey Network Discovery expects to launch early next year.

Questions? Comments?