Discovery CEO David Zaslav wants Wall Street to ignore the “noise” about financial losses at his OWN joint venture with Oprah Winfrey. “We have a long way to go,” he told analysts this morning, but adds that “despite what you read, we’re making real progress” — forecasting that cash flow will break even in the second half of 2013. The company won’t say exactly how much the venture is losing. It acknowledges, though, that OWN accounted for most of the $50M in “other” costs that Discovery reported for Q1. (Susquehanna Financial Group analyst Vasily Karasyov estimates that Discovery took a $30M hit to shutter Rosie O’Donnell’s talk show.) Discovery has to report 100% of OWN’s losses because they outweigh the equity in the channel. But “2012 funding will be less than 2011,” Zaslav says, now that OWN “has taken significant steps that will help the network improve its financial position.” The channel cut costs and employees.
Zaslav’s more upbeat about OWN’s growth opportunities. Beginning next year several pay TV providers including Comcast will pay significantly higher fees for the channel (Zaslav won’t say how much) than they pay now or paid for OWN’s predecessor, Discovery Health. He also sees ad sales improving as the audience grows. Zaslav says OWN reaches 85M pay TV subscribers, up from 80M. With about 15M viewers a week, it has become the 27th-highest-rated network for women — up from last year when it was just among the top 45 targeting that audience. OWN doesn’t have to “morph to find dramatic ratings increases.” As a result, he says, it’s now attracting “blue chip advertisers.” He adds that Discovery is “a long-term driven company…What we see gives us a lot of confidence.” Investors don’t seem so certain: Discovery shares are down 3.4% in early trading.
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