Discovery Expects Slower Ad Growth Due to Ratings Hiccup

CEO David Zaslav Blames Calendar, Weakness at Discovery Channel and TLC

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Discovery Communications' ad revenue will be lower than expected due to ratings shortfalls at its flagship Discovery Channel and sibling TLC, company CEO David Zaslav said at an investor conference on Monday.

Parker Schnabel panning for gold on 'Gold Rush'
Parker Schnabel panning for gold on 'Gold Rush' Credit: Discovery

Fewer season premieres in October and November, as well as declines in popular programs "Moonshiners" and "Gold Rush," have contributed to the weakness, Mr. Zaslav said, speaking at UBS' media and communications conference taking place in New York City.

Discovery previously predicted that domestic ad sales would grow at a high-single-digit percentage in the fourth quarter.

Still, Mr. Zaslav touted the success of the company's Investigation Discovery network and OWN, the joint venture with Oprah Winfrey that recently became profitable.

Even amid digital streaming, Mr. Zaslav said more advertisers are returning to TV. And he doesn't expect much to change in the next three years, he said, especially for those who own their content.

While U.S. ad sales growth may be slowing, Discovery Communications' rate of increase internationally has been strong. Mr. Zaslav said his focus has been on global growth, adding that he spends more than half of his time overseas.

Discovery has been slow to make its content available digitally, due to the economics of the market. Mr. Zaslav noted that Discovery isn't making much money on streaming content.

But the company's new carriage deal with Time Warner Cable last month will grant TV Everywhere rights to the cable operator, the company's first such agreement with a cable provider.

And al though Discovery's agreements with Amazon and Netflix cover programming that is more than two or three years old, Mr. Zaslav said he is meeting with Netflix's CEO Reed Hastings and is open to making more newer content available on the platforms.

While Mr. Zaslav agreed that binge viewing is an important part of the new TV ecosystem, he also gave kudos to NBC for its live broadcast of "Sound of Music" last week, which he said is good for Discovery and the industry.

"There is still something innately social about TV," Mr. Zaslav said.

When it comes to time-shifted viewing, some networks are hoping they can convince advertisers to pay for ads viewed within 7 days of their original air date, a standard known as C7, rather than the prevailing standard of 3 days. CBS Corp. CEO Les Moonves last month even said advertisers should pay for viewing over a 30-day window.

But Mr. Zaslav said Monday that C7 is more important to broadcasters than Discovery, which sees about 80% to 85% of its viewing take place three days after a show airs.

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