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MUMBAI:
US broadcaster Discovery has announced that revenue for the
first quarter was up 12 per cent to $795 million.
International
revenue increased 23 per cent to $267 million from $217 million
and operating cash flow increased 156 per cent to $69 million
from $27 million for the first quarter of 2008, as compared
to the same period in 2007.
Excluding
foreign currency gains, international revenue increased by
15 per cent and operating cash flow (OCF) increased by 117
per cent in the first quarter. OCF margin for international
networks in the first quarter of 2008 increased 14 percentage
points to 26 per cent from 12 per cent in the first quarter
of 2007.
Revenue
growth was driven by a 24 per cent increase in distribution
revenue and a 19 per cent increase in advertising revenue.
Distribution revenue growth was primarily due to subscriber
increases in Latin America, as well as Central and Eastern
Europe, where many emerging economies are experiencing increased
demand for pay TV. Excluding foreign currency gains, distribution
revenue growth was 15 per cent.
Ad revenue growth was primarily due to strong performances
in Germany and Central Europe and the impact of favorable
foreign currency exchange rates. Discovery is continuing to
benefit from investments in building local channels and infrastructure
to support ratings and ad revenue growth in multiple markets.
Excluding the impact of foreign currency exchange rates, advertising
revenue growth was 11 per cent.
Other revenue grew 30 per cent in the first quarter, primarily
reflecting growth at Antenna Audio in the UK, Europe and Taiwan.
Excluding foreign currency gains, other revenue grew 28 per
cent.
Operating expenses for international networks increased four
per cent entirely due to foreign currency movements. Excluding
the impact of foreign currency exchange rates, operating expenses
remained flat..
In
the US, revenue for the first quarter of 2008 increased by
three per cent to $491 million from $477 million and OCF increased
by 18 per cent to $247 million from $210 million, as compared
with the same period in 2007.
This
includes a 113 per cent increase in digital media revenue
primarily driven by the acquisitions of Treehugger.com and
HowStuffWorks.com in the third and
fourth quarters of 2007, respectively. Excluding Travel Channel
results from the first quarter of 2007, US revenue increased
13 per cent and OCF increased 24 per cent. U.S. networks'
OCF margin for the first quarter of 2008 improved by 6 percentage
points to 50 per cent compared to 44 per cent in the first
quarter of 2007. This improvement was driven by decreased
content amortization expenses for the first quarter of 2008,
partially offset by the increased strategic investment of
$7 million in Discovery's digital media assets.
Revenue
growth during the quarter, excluding Travel Channel, was primarily
driven by a 14 per cent increase in advertising revenue due
to higher cash sellouts and higher scatter market rates across
most networks. Distribution revenue grew 6 per cent for the
quarter, excluding Travel Channel, primarily due to contractual
rate increases for the fully distributed networks combined
with a 5 per cent increase in average paying subscription
units, principally from networks carried on cable and satellite
digital tiers.
Revenue was also favorably impacted by an 80 per cent increase
in other revenue items, including Discovery's advertising
sales representation of Travel Channel and the acquisition
of HowStuffWorks in December 2007.
US networks' operating expenses decreased nine per cent for
the quarter, primarily due to the disposition of Travel Channel
combined with the effect of the $129 million fourth quarter
2007 content impairment charge. This charge to recognise the
lessened value of some content assets deemed by management
to be no longer appropriate for its new branded programming
strategies resulted in a temporary decrease in content amortization
expense of $18 million for the first three months of 2008.
This
level of content amortisation expense, which is lower than
historical levels, is expected to continue through the third
quarter of 2008 with the level of savings decreasing due to
the commissioning of new programming and building back up
for the original inventory across brands which will result
in a return to a regular amortisation cycle for most networks.
Excluding Travel Channel results, quarterly operating expenses
increased by three per cent compared to the same period in
2007.
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