Discovery profits spike 43% in Q2 on strong performance of U.S. cable networks

The decision to move up Shark Week hurt ratings for the annual TV event, said Discovery CEO David Zaslav.

Driven in large part by improvements in the U.S. TV advertising market, Discovery Communications posted a 43 percent rise in second-quarter profits to $408 million and a 3 percent uptick in quarterly revenue to $1.71 billion.

The improvement is welcome news to the U.S. pay-TV industry, where programmers had steadily seen advertising dollars drift away to digital platforms over the last few years. Now, because of challenges facing digital, including ad blockers and lower engagement metrics, these dollars are drifting back to linear cable networks like Discovery.

"The advertising market feels strong," said Discovery CEO David Zaslav, in today's earnings call. "Scatter is better than double digit above last year."

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Discovery's U.S. cable networks saw revenue improve by 7 percent in the second quarter to $873 million. Operating Income Before Depreciation and Amortization (OIBDA) was up 10 percent to $544 million among these channels. 

This was largely driven by a 5 percent increase in ad sales to $471 million. And although Discovery Networks reported a "slight declines in subscribers," revenue from carriage fees increased by 8 percent to $386 million. 

The strong quarterly numbers, which met analyst consensus forecasts, came despite numerous challenges, beyond the strong U.S. dollar that hampered Discovery's European profitability. 

For one, Zaslav said part of Discovery's U.S. audience has been siphoned away by election coverage on cable news networks. 

"They're up almost 100 percent," said Zaslav, speaking of outlets like CNN and Fox News. "A lot of the viewership going to those networks is coming from some of our channels."

Zaslav, meanwhile, also lamented his company's decision to move its popular "Shark Week" programming block back from August to late-June/early-July, where ratings suffered. 

"We got it to a whole different level over the last two years, and we dropped off," Zaslav says. "We made a mistake. It was too early. A lot of people are still working." In July and August "we get a huge boost in day and late night; people are just hanging out. It's the dog days of summer."

Finally, Discovery announced that it has renewed its carriage agreement with Liberty Global in Europe. 

For more:
- read this Discovery earnings release
- read this Deadline Hollywood story
- read this Hollywood Reporter story

Related articles:
Discovery Channel is cord-cutters' favorite cable network, according to survey
Execs from Discovery, Roku and others warn the skinny bundle will hamper content creation
Programmers have best upfront in 3 years, sell $18.6 billion worth of ads

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