Discovery Reports Lower 3Q Earnings

Domestic ad revenue down 3%
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Discovery Communications reported lower third quarter profits and a drop in domestic advertising revenue.

Net income fell 22% to $219 million, or 36 cents a share, from $279 million, or 43 cents a share, a year ago. The company took a $40 million charge for its investment in Lionsgate and for higher equity-based compensation.

Revenues were flat at $1.6 billion.

Stock market analysts were expecting earnings of 43 cents a share.

“While we faced challenging but expected headwinds this quarter, Discovery is well positioned for long-term growth driven by our well-defined global brands, differentiated content and favorable distribution agreements,” said David Zaslav, CEO. “We have continued to strengthen and maximize our traditional pay-TV offering with robust new programming while aggressively exploiting new opportunities to leverage our content across numerous digital platforms around the world. Amid an ever shifting global media ecosystem, Discovery is evolving to reach more consumers on more screens and platforms than ever before.”

Discovery’s U.S. networks reported a 3% gain in adjusted operating income to $458 million. Revenues were up 2% to $793 million, with distribution revenue rising 7% to $381 million, offsetting a 3% decline in ad revenues, which dropped to $396 million.

The company said ad revenue were off because of ratings declines, and that distribution revenue rose despite a “slight” decline in subscribers.

Adjusted operating income for Discovery’s international networks was down 16% to $183 million. Revenues fell 3% to $720 million.

The company said that excluding the effects of currency, revenues were up 5% and operating income was up 7%.

Discovery said it would update its full-year outlook for 2016 on its earnings call Tuesday morning.

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