Bethany Kozachuk and Christina McDonagh

Discovery Communications
One Discovery Place
Silver Spring, MD 20910

Phone Number: (240) 662-2000
Website: http://www.discovery.com/

OVERVIEW

Founded in 1982 by University of Alabama graduate John Hendricks, Discovery Communications has become one of the most influential companies in the global cable market. Discovery struggled at first, but deals with the cable operators such as Telecommunications Inc, Cox Cable Communications, and Newhouse Broadcasting group soon arose. By June of 1986, Discovery had seven million subscribers; spurring the company to commission its first original program, Iceberg Alley, in 1989. [11] [4]

 

Discovery Communications has become one of the leaders in global entertainment. The company consists of 33 channels worldwide, three full-service production studios, and in the US, 13 cable and satellite networks that compromise the industries most widely distributed portfolios in the US. This portfolio includes three major channels: Discovery Channel, TLC (formerly The Learning Channel) and Animal Planet. These three channels reach over 91 million households in the US and have kept Discovery Communications at the top of the industry. Discovery’s content can be divided into three genres: Kids, Sports, and Non- fiction.[6] [11]

 

Key Executives

The President and CEO of Discovery Communications is David Zaslav. Zaslav has led the company since 2007, and under his reign, Discovery has begun trading as a public company on the Nasdaq stock exchange. As a result, in 2014, the Discovery became a Fortune 500 company. [10]

2016-2017 Program Roster

For the 2016-2017 Programming Slate, Discovery announced that their lineup would consist of 22 returning shows, but also 20 new shows as well. Cooper’s Treasure Sacred Steel, The Wheel, and a Deadliest Catch spin-off,  Deadliest Catch:Dungeon Cove, are four of the highly anticipated shows coming out this season. Discovery also announced that they would be launching a revolutionary anthology series called Discovery Impact. The series was aired at the 2016 Sundance Film Festival and will focus on the impact that mankind has had on the earth’s environment, as well as what individual people can do to solve the global environmental issues.[9] Fan favorites like Naked and Afraid, Gold Rush, and Bering Sea Gold are on the roster for this year as well. The week long event Shark Week has been kept on as well. Last year’s Shark Week had the highest ratings ever for the event. All of these programs have kept Discovery at the top of the pack, but there are still gaps that need to be filled in this programming giant’s empire. [1]

Financials

According to the third quarter reports, net income available to Discovery decreased 22% to $219 million from $279 million due to a $50 million after-tax impairment charge because of a Lionsgate investment and higher equity-based compensation. This was fractionally offset by a decrease in taxes, currency-related transaction gains, and higher contribution from equity investors income. Discovery’s earnings per share (EPS) decreased 16% to $0.36 because of lower DCI Net Income, but that was partially offset due to lower shares outstanding.  Adjusted EPS decreased 15% to $0.40 compared to $0.47 of last years third quarter. Free cash flow dramatically increased 75% to $410 million due to lower cash taxes and the timing of working capital.[3] With all of this financial information, it seems as though Discovery has done well for itself in the third quarter, but there are some concerns within the company about distributing media more effectively and their ranking in the stock exchange.[7]

While Discovery is considered to be wildly successful, the company is not immune to hardships. Discovery posed an earnings surprise (down) of 16.39% and in the past three of four quarters has had an earnings surprise averaging 6.02%. These swings in earnings are due to the company’s struggle to produce advertising revenue. Also, problematically, a major source of its revenue comes from 10% of its customers.[15]

Stocks at discovery have been sporadic over the years. While the company was doing well in 2015, once 2016 hit, Discovery seemed to take a sharp drop, according to the NASDAQ. Stock has been consistently declining over the past months, but there is still hope for Discovery. With the growth of online streaming and OTP (over the top), many customers are cutting their ties to cable and satellite. In order to keep viewers tuning in, Discovery Communications has begun efforts to get its content on as many screens as possible.[15]

Happening Now

In November, Discovery joined a group of over thirty producers and distributors that signed with 560 Media. 560 Media is a Global Collections Agency that offers clients intelligence-based revenue-management services.[8] The agency specializes in Television and Film rights that are beneficial to companies in a fragmented and intricate market. Discovery’s partnering with 560 Media will certainly give the evolving company the new edge that it desperately needs. [12] The Director of Global Music at Discovery thinks that,”…560 Media’s fresh and flexible approach to catalog representation will assist Discovery in this specialist area, allowing us to maximize remuneration in the international arena.” Management at Discovery is also working on shifting their focus toward secondary rights management for their high quality catalog. 560 Media will enable Discovery to keep tabs on their revenues and help Discovery gain earning power that is crucial in today’s market.[13]

While Discovery has been late to the online TV business, it certainly has been making

efforts to catch up with other companies like Disney. Last year, the company began allowing online streaming through the Discovery GO app to cable and satellite subscribers. Research found that the key demographic for the app was between 18 and 34, yet that hasn’t quite helped the network grow. [14] Discovery also announced that they will be starting a joint venture to hasten the growth of its Eurosport channel to an online-format as well as new collaborative efforts with Mediacom, Hulu, Sony Corporation, and CBS Corp. Discovery has also launched a joint deal to produce a new digital-only media holding company named Group9. Group9 will be a digital and social media video provider that will have an estimated 3.5 billion views per month. Discovery will own 39% of the entity and have the option to purchase the whole company outright.[2]

The Future?

Discovery has recently partnered with AT&T to expand their streaming services with DirecTV Now. Other networks and program providers like Disney, HBO, Turner, and NBC Universal have signed up to work with AT&T in their new DirecTV Now subscription video on demand (SVOD) program. There will be three streaming options provided. Two will charge a monthly rate, and the third, Freeview, will be ad-supported. There will be a wide variety of content on the streaming service that will vary depending upon which option the subscriber chooses.[16]

BIBLIOGRAPHY

[1]. @Cablefax. “Discovery Upfront.” Cablefax. N.p., 01 Apr. 2016. Web. 29 Nov. 2016.

[2]. “Can Discovery Communications Survive in a Streaming TV World?” NASDAQ.com. N.p., 18 Nov. 2016. Web. 29 Nov. 2016. http://www.fool.com/investing/2016/11/18/can-discovery-communications-survive-in-a-streamin.aspx

[3].”Christian Wheeler.” ReviewForTune. N.p., 18 Nov. 2016. Web. 29 Nov. 2016.

[4]. “Discovery Communications, Inc. – Company Profile, Information, Business Description, History, Background Information on Discovery Communications, Inc.” Discovery Communications, Inc. – Company Profile, Information, Business Description, History, Background Information on Discovery Communications, Inc. N.p., n.d. Web. 29 Nov. 2016.

[5]. “Discovery Communications, Inc.” Discovery Communications Inc. N.p., n.d. Web. 29 Nov. 2016.

[6]. “Discovery Communications, Inc.” Discovery Communications Inc. N.p., n.d. Web. 29 Nov. 2016.

[7]. “Discovery Third-Quarter Earnings, U.S. Ad Revenue Drop.” Surghar Daily. N.p., 03 Nov. 2016. Web. 29 Nov. 2016.

[8]. Editor. “Discovery Taps 560 Media for Rights Revenue Collection.” Rapid TV News. N.p., n.d. Web. 29 Nov. 2016. www.fiercecable.com/broadcasting/discovery-signs-deal-560-media-for-secondary-rights

[9].Hipes, Patrick. “Discovery Channel Greenlights Unibomber Scripted Series & ?Deadliest Catch Spinoff For 2016-2017; Sibling Nets Unveil New Slates Upfronts.” Deadline. N.p., 31 Mar. 2016. Web. 29 Nov. 2016. corporate.discovery.com/discovery-newsroom/discovery-channel-announces-2016-2017-upfront-programming-slate/

[10]. “CNBC Excerpts: David Zaslav, CEO of Discovery Communications, on CNBC’s Closing Bell Today.” CNBC. N.p., 19 Oct. 2016. Web. 29 Nov. 2016.

[11]. @IDAorg. “Two Decades of Discovery, and There’s Still More to Learn.” International Documentary Association. N.p., n.d. Web. 29 Nov. 2016. www.documentary.org/magazine/two-decades-discovery-and-theres-still-more-learn

[12]. Munson, Ben. “Discovery Signs Deal with 560 Media for Secondary Rights.” FierceCable. N.p., 18 Nov. 2016. Web. 10 Nov. 2016.

[13]. “NEWS.” 560 MEDIA. N.p., n.d. Web. 29 Nov. 2016. www.560media.com/news/

[14]. Rossolillo, Nicholas. “Can Discovery Communications Survive in a Streaming TV World?” The Motley Fool. N.p., 01 Jan. 1970. Web. 29 Nov. 2016.

[15]. Street, Active Wall. “Post Earnings Coverage as Discovery Communications Misses Earnings and Revenue Forecast.” Baystreet.ca. N.p., n.d. Web. 29 Nov. 2016. www.baystreet.ca/viewarticle.aspx?id=448707

[16]. https://corporate.discovery.com/wp-content/uploads/2016/11/163002_2016_Q3_AT-A-GLANCE_WEB.pdf