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Discovery India smaller part of international story, says JB Perrette

It’s a low ARPU market, but it’s growing nicely, he added.

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MUMBAI: It’s been nearly a year since factual programming major Discovery launched its streaming offering in India. So how are Discovery and Discovery+ doing here? Especially considering that India CEO Megha Tata will be completing her second year as its head honcho come March 2021.

The megacorp’s president & CEO – Discovery Networks International JB Perrette gave an indication in an investor call yesterday while presenting its latest financials for the year and fourth quarter ended 31 December 2020.

“Look, it's been a nice business,” he revealed. “It's grown for us nicely. But it remains, in terms of, obviously, the logical questions of that being a lower ARPU market, it is a – it remains a small piece of the overall, kind of, single digit level percentage of our international portfolio today. So it's a nice – it's grown nicely, but it remains a smaller part of the overall international subscriber story.”

Overall, Discovery announced that it had secured seven million subscriber additions for its portfolio of streaming products over the five million it had declared in December 2020. “We are currently at 11 million across our entire portfolio but on course to hit 12 million by end February,” said Discovery president & CEO David Zaslav. “Out of the seven million new adds, more than half are paying subs to Discovery+ in the US.”

He added that the streamer’s international launch has just started. “…This comes without adding any new markets other than our previous DPlay  markets that we rebranded to Discovery+. For example, we relaunched Italy just a few weeks ago and the UK in Q4 2020, both of which are off to a strong start,” he disclosed. “Given our ownership and control of all of our content, our increasingly relevant content, expect us to light up markets globally over the next 18 months or so. And in many key markets, we intend to partner with key distributors, such as we did with Vodafone and Sky. As you know, our strategy outside the US, which we think is really unique, is local entertainment, local non-fiction, local sport in Europe and local entertainment, local non-fiction around the world.”

Discovery+ which is available as in SVoD, AVoD and Ad lite versions, has managed to attract more than 100 advertisers to its platform with CPMs doubling to $40, he highlighted. “We are now offering contextual keyword targeting, and interactive ads will roll out by the end of Q1 with pause and binge ads scheduled for Q2,” he pointed out.

According to him, Discovery+ is displaying more of long tail consumption trends with its tentpole shows accounting for just 10 per cent of views as compared to 30-40 per cent for streamers such as Netflix and Amazon. “So our content library is working well,” he said.

Discovery+’s technical team is working on rolling out its sophisticated recommendation engine internationally as well, even as its re- platforming its Dplayer and Eurosport services in European markets into Discovery+ in time for the Olympics later this year.

Here’s a quick look at its financial for the year ended 31 December 2020, as disclosed in its press release:

·       Total revenues of $10,671 million decreased four per cent, both reported and ex-FX.

·       US advertising revenues decreased five per cent  and distribution revenues increased four per cent  (or increased three per cent excluding certain non-recurring items recognised in the second quarter); and

·       International advertising revenues decreased 12 per cent  and distribution revenues decreased three per cent  both ex-FX.

Net income available to Discovery Inc was $1,219 million and EPS was $1.81 per diluted share.
Adjusted EPS was $3.20 per diluted share.
Total adjusted operating income before depreciation and amortisation (OIBDA) decreased 10 per cent  to $4,196 million, or decreased 9 per cent ex-FX.

Cash provided by operating activities was $2,739 million and free cash flow was $2,337 million.
Repurchased 41.6 million Series C common shares for $965 million at an average price of $23.18 per share.

US performance fourth quarter 2020

Total US Networks revenues of $1,778 million increased one per cent compared to the prior year quarter.

·       Advertising was flat as higher pricing and the continued monetisation of content offerings on our next generation platforms were offset by secular declines in the pay-TV ecosystem and lower ratings.

·       Distribution increased five per cent  primarily driven by increases in contractual affiliate rates, partially offset by a decline in linear subscribers.

·       At 31 December 2020, subscribers to fully distributed networks were three per cent lower and total portfolio subscribers were five per cent  lower than at 31  December 2019.

·       Total operating expenses of $832 million increased one per cent compared to the prior year quarter.

·       Costs of revenues increased one per cent primarily due to investments in content to support our next generation initiatives.

·       SG&A expenses were consistent to the prior year quarter as a reduction in travel costs due to the Covid2019 pandemic was offset by higher marketing-related expenses to support our next generation initiatives and higher personnel costs.

·       Adjusted OIBDA increased 2% to $946 million.

Full year 2020

Total US Networks revenues of $6,949 million decreased two per cent compared to the prior year.

·       Advertising decreased five per cent primarily due to softer demand stemming from the Covid2019 pandemic, secular declines in the pay-TV ecosystem, lower ratings, and a decline in inventory, partially offset by increases in pricing and the continued monetisation of content offerings on our next generation platforms.

·       Distribution increased four per cent driven by increases in contractual affiliate rates and certain non-recurring items, partially offset by a decline in linear subscribers. Excluding certain non-recurring items, distribution increased three per cent

Total operating expenses of $2,974 million were flat compared to the prior year.
Costs of revenues increased two per cent primarily due to investments in content to support next generation initiatives partially offset by a reduction in production projects as a result of Covid2019 and a non-recurring reserve release established in purchase accounting.

SG&A expenses decreased four per cent primarily due to a reduction in travel costs as a result of Covid2019 and lower marketing-related expenses, partially offset by an increase in personnel costs to support our next generation initiatives.

Adjusted OIBDA decreased three per cent  to $3,975 million.

International networks performance in Q4 2020

    Total international networks revenues of $1,105 million decreased one per cent  or decreased three per cent ex-FX, compared to the prior year quarter.

·       Advertising decreased one per cent ex-FX primarily driven by a decline in demand stemming from the Covid2019 pandemic and the discontinuation of pay-TV distribution with certain European operators.

·       Distribution decreased four cent  ex-FX primarily driven by Covid-related disruptions to the sports schedule in Europe, lower contractual affiliate rates, and the discontinuation of pay-TV distribution with certain European operators, partially offset by higher next generation revenues due to subscriber growth.

    Total operating expenses of $909 million increased 13 per cent, or increased nine per cent  ex-FX, compared to the prior year quarter.

·       Costs of revenues increased 10 per cent ex-FX primarily due to sports content spend in Europe.

·       SG&A increased seven per cent  ex-FX primarily attributable to higher personnel costs and higher marketing-related expenses to support our next generation initiatives, partially offset by a reduction in travel costs as a result of Covid2019.

Adjusted OIBDA of $196 million decreased 38 per cent, or decreased 35 per cent  ex-FX.

Full Year 2020

Total international networks revenues of $3,713 million eight per cent or decreased seven per cent ex-FX, compared to the prior year.

·       Advertising decreased 12 per cent ex-FX primarily driven by a decline in demand stemming from the COVID-19 pandemic and the discontinuation of pay-TV distribution with certain European operators.

·       Distribution decreased three per cent ex-FX primarily driven by lower contractual affiliate rates, the discontinuation of pay-TV distribution with certain European operators, and Covid-related disruptions to the sports schedule in Europe, partially offset by higher next generation revenues due to subscriber growth.

Total operating expenses of $2,990 million were flat compared to the prior year, both on a reported and ex-FX basis.

·       Costs of revenues decreased one per cent ex-FX primarily due to a reduction in the number of sporting events in Europe due to Covid2019

·       SG&A increased three per cent ex-FX primarily due to higher personnel costs to support our next generation initiatives, partially offset by a reduction in travel costs as a result of Covid2019.

Adjusted OIBDA of $723 million decreased 32 per cent, or decreased 28 per cent  ex-FX

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