Q3-2015: Discovery’s US Networks mitigate International Networks revenue drop due to forex

BENGALURU:  Discovery Communications, Inc. (Discovery) reported a 0.7 per cent drop in revenue in the quarter ended 30 September, 2015 (Q3-2015, current quarter) at $1557 million as compared to the $1568 million in the corresponding year ago quarter. Its US networks reported eight per cent growth in revenue to $781 million (50.1 per cent of Total Revenue or TR) in the current quarter as compared to the $723 million (46.1 per cent of TR) in Q3-2014 and hence mitigated the nine per cent drop in international Networks revenue. The company’s International Network revenue in the current quarter declined to $740 million (47.5 per cent of TR) from $813 million (51.8 per cent of TR) in the corresponding quarter of last year. Discovery says that revenue at its International Networks declined primarily due to currency effects. 


Discovery’s Adjusted Operating Income Before Depreciation and Amortization( (OIBDA) decreased nine per cent to $576 million, as four per cent growth at US Networks was more than offset by a 21 per cent decline at International Networks, primarily due to currency effects, and a small operating loss at ‘Education’ and ‘Other’.


"Discovery's unique portfolio of assets and global brands drove yet another quarter of strong worldwide viewership and financial results," said Discovery president and CEO David Zaslav. "Discovery is like no other media company, propelled by our unmatched global infrastructure, local leadership, efficient global content model and sturdy position in the US, and we are confident in our ability to drive near and long-term growth and shareholder value."


Basic and dilute Earnings per share (EPS) in the current quarter increased to $0.43 as compared to the $0.41 in Q3-2014.


US Networks


The above mentioned US Networks revenue growth in the current quarter was driven by 12.3 per cent growth in Distribution and 5.7 per cent growth in Advertising revenues. US Networks Distribution revenue increased to $357 million in the current quarter as compared to the $318 million in Q3-2014. Discovery says that Distribution revenue growth was primarily driven by higher rates and the consolidation of Discovery Family.


US Network’s Advertising revenue in Q3-2015 increased to $410 million as compared to the $388 million in the corresponding year ago quarter. The company says that Advertising revenues increased primarily due to higher pricing.


US Networks adjusted OIBDA increased four per cent to $443 million (56.7 per cent margin) in the current quarter from $426 million (58.9 per cent margin) in Q3-2014. Excluding the consolidation of Discovery Family, adjusted OIBDA was relatively flat, as revenue growth was offset by an 11 per cent increase in operating expenses, mainly due to higher content amortization and marketing costs.


International Networks


Adjusted OIBDA of the segment declined 21.3 per cent to $218 million (29.5 per cent margin) in Q3-2015 from $277 million (34.1 per cent margin) in Q3-2014. As mentioned above, International Networks revenue and adjusted OIBDA declines in the current quarter were due to changes in foreign currency exchange rates.

International Networks Distribution revenue declined 2.6 per cent in the current quarter to $419 million from $430 million in Q3-2014. International Networks Advertising revenue in Q3-2015 declined 14.2 per cent to $289 million from $337 million in the corresponding quarter of last year.


Discovery says that excluding currency effects and the impact of Eurosport and SBS Radio, total revenues were up nine per cent. Distribution revenues, excluding the impact of Eurosport and currency effects, grew eight per cent mainly from increased subscribers and rates in Latin America as well as increased subscribers in CEEMEA. Advertising revenues, excluding the impact of Eurosport, SBS Radio and currency, were up 12 per cent, primarily due to higher volume and prices in Latin America and higher ratings, prices and volume in Southern Europe.  Other revenues, excluding the impact of Eurosport, SBS Radio and currency, decreased $2 million, primarily due to lower program sales. 


The company informs that excluding the impact of Eurosport, SBS Radio and currency, Adjusted OIBDA was up four per cent, reflecting the nine per cent revenue growth partially offset by a 13 per cent increase in operating expenses. The higher operating expenses were primarily due to increased content expenses and personnel costs.


Education and Other


Education and Other revenue for Q3-2015 increased by $1 million. Adjusted OIBDA decreased by $8 million compared to Q3-2014 due to additional investments in education primarily related to digital textbooks, higher production costs associated with greater utilisation of our in-house production companies, and higher personnel costs.


The segment reported revenue of $36 million in the current quarter as compared to $35 million in Q3-2014. Adjusted OIBDA in Q3-2015 was negative $5 million as compared to positive adjusted OIBDA of $3 million in Q3-2014.


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