Discovery Communications' Q4 earnings "were dented by headwinds" on the int'l front, from "higher costs at its Eurosport networks to programming write-downs to adverse currency exchange rates against a strong dollar," according to Cynthia Littleton of VARIETY. Discovery posted a 3% year-over-year increase in revenue for the quarter to $1.67B and a 1% gain in adjusted operating income to $581M. Operating income at Discovery’s 13 U.S. channels was up 9% to $447M but down 12% on the int'l side to $231M. Distribution revenue in the U.S. was up 6% to $375M but offset by a 3% decline in subscriber rates. Distribution revenue overseas was up 3% to $418M, but would have been up 10% "if not for currency issues." Advertising was "essentially flat at home and abroad." The U.S. networks logged a 1% gain for the quarter to $421M. Int'l was down 2% to $379M. Discovery CEO David Zaslav "was also pressed" about cost projections for the company's int'l networks, "particularly the sports rights for Eurosport’s linear and digital offerings." Zaslav defended the expenditure on Olympics rights, "saying his experience at NBC taught him the brand-building value of carrying the event" (VARIETY, 2/14). In L.A., Georg Szalai reported Credit Suisse analyst Omar Sheikh "recently reduced his rating and price target on Discovery's stock." Sheikh: "Discovery's domestic ratings dipped materially during 2016, and the latest data from Nielsen suggests there was no respite in the fourth quarter. The outcome of the U.S. presidential election is likely to continue to drive audiences to news networks, and we see Discovery's factual networks as particularly vulnerable to losing share." The company "has been affected by foreign-currency fluctuations over the past year." Amid a strong dollar, "foreign results have translated into fewer dollars, affecting the financials of companies with strong operations abroad." He also said that Discovery "is talking to Hulu, Google and all the players building new digital video services." Discovery recently extended a carriage deal with Sky in the U.K. and Germany after a "war of words." Zaslav said that the deal "affirmed" the value of the company's portfolio and its appeal with viewers. Discovery will launch a second free-to-air channel in the U.K. that will make money this year, Zaslav said, "without providing full networks." It currently has U.K. free-to-air channel Quest, which shows factual, lifestyle and entertainment programs (THE HOLLYWOOD REPORTER, 2/14).
