Discovery Q2 Sales Beat Expectations; U.S. Ad Sales Down 14% As Networks Gain Share During COVID-19
Discovery Inc. saw second quarter U.S. ad revenue dip 14% on lower demand stemming from COVID-19 but its portfolio of networks gained share in primetime with TLC delivering its best quarter ever, the company said Wednesday.
The dip in the U.S. was also due in part to secular declines in the pay TV ecosystem and lower inventory — offset by higher overall ratings and pricing. U.S. distribution revenues increased 7% (or 2% without certain one-time items) on increases in contractual affiliate rates.
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The company’s roster includes Discovery Channel, HGTV, Food Network, TLC, Investigation Discovery, Travel Channel, MotorTrend, Animal Planet, Science Channel, and the forthcoming multi-platform JV with Chip and Joanna Gaines, Magnolia, as well as OWN: Oprah Winfrey Network in the U.S. Some, like the Food Network, were particularly well positioned to continue scaled back production and benefit from sheltering at home trends during the pandemic.
During a conference call, CEO David Zaslav noted that the company brought 1,000 hours of new content to our networks since the world shut down. Amy Schumer Learns To Cook, shot at home for Food Network, was nominated for a Primetime Emmy last week.
International ad sales fell 37% while distribution revenue was down 2%. Total international operating expenses of $590 million dropped 20% due to canceled sporting events in Europe.
Total share of viewing across its international portfolio in the quarter of 2020 improved 4% on average, with strong share growth in India, UK and Italy.
Discovery’s consolidated revenues of $2.54 million dipped 12% compared to the prior year quarter.
Net income plunged to $271 million, or $0.40 a share, from $947 million, or $1.33, the year before.
Free cash flow was $879 million.
“We generated significant free cash flows in Q2, demonstrating the durability of our business, especially against the backdrop of a historic disruption to the global advertising market due to the impacts of the pandemic,” said Zaslav. “With our significant liquidity cushion and the initial signs of stabilization that we’re seeing in many of our key markets around the world, we are pleased to announce our intention to resume returning capital to shareholders through share repurchases. We are cautiously optimistic about the global outlook for the rest of the year and firmly believe that the long-term prospects for Discovery remain as vibrant as ever.”
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