Discovery Shows Q3 Softness But Stays Bullish On Skinny Bundle Presence And Ability To Play “Above The Globe”


Discovery Communications reported mixed third-quarter results, but executives during a conference call with Wall Street analysts pointed to expanding skinny-bundle distribution and growth overseas.

Six months after closing its $14 billion acquisition of Scripps Networks Interactive, the company reported adjusted earnings per share of 52 cents, which fell short of Wall Street’s consensus estimate of 59 cents. Total revenue reached $2.59 billion, which met expectations. On an apples-to-apples basis, minus Scripps, revenue inched up 1% over the same quarter a year ago.

Subscriber trends — a key metric for programmers as the pay-TV bundle undergoes transformation — continue to raise questions, though CEO David Zaslav takes a relentlessly upbeat view. The company’s fully distributed networks saw subscriber losses of 2% in the U.S., compared with a 3% downturn a year ago.

“I see that as quite encouraging,” Zaslav said. He said the erosion of subscriptions industrywide “is about these over-stuffed, hundred-dollar bundles. There’s been a rejection of this over-pricing.”

Discovery’s networks are soon to be added to Sling TV and represent nearly 30% of the offerings on AT&T Watch. Even though distributors have reported downturns in skinny bundle subscribers, Zaslav chalked that up mostly to business strategy, noting strong customer demand for more flexible, lower-priced TV packages. “They have to figure out what channels they carry in these baskets and then how they price them and then how they market them,” he said. In terms of their pitch to consumers, he added, “I think you see an awkwardness in that too many of these packages are carrying too much stuff. So they’re losing money.”

All of the cord-shaving and re-bundling ultimately will benefit Discovery, Zaslav said. “We think we can be the big winner here.”

Zaslav repeatedly used the phrase “above the globe” as a superlative beyond “global” and an indicator of Discovery’s ambition to drive growth around the world. Businesses like a new partnership with the PGA Tour for a golf streaming service operating everywhere except the U.S. as well as Eurosport and international versions of core cable networks all got ample mentions during the call.

The company said it remains on track to record $600 million in cost savings from the Scripps deal by March 2020 and is forecasting mid-single-digit declines in operating costs.

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