Discovery Prepares for Distributed Future by Looking for Deeper Ad Integrations

Zaslav Sees Positive Ad Trends in Third Qaurter

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As Discovery Communications explores new forms of distribution, it is also evolving its approach to advertising by finding ways to "integrate advertising more deeply into our content," President-CEO David Zaslav said during the company's second-quarter earnings call with Wall Street on Wednesday.

Digital platforms often offer fewer or no ad breaks, or draw less traditional advertiser interest, than traditional TV. But deeper integrations could appeal to marketers because they'll persist on any platform that eventually carries the program.

Ad revenue in the quarter remained flat with the period a year earlier, but Mr. Zaslav said there is an uptick in momentum so far in the third quarter.

"Looking ahead, we are bullish on the third-quarter ad trends," Mr. Zaslav said, pointing to improvement in ratings, especially at its flagship Discovery Channel, which "is allowing us to continue to take advantage of a healthier scatter market."

Marketers seek ad time in the so-called scatter market throughout the year, as opposed to the commitments for ad time they strike in TV's annual upfront market.

Mr. Zaslav expects the company's U.S. ad revenue to increase by a low single-digit percentage in the third quarter.

"Scatter pricing has been fine for a long time, but the volume wasn't there .... But third quarter really seems to be accelerating," Mr. Zaslav said.

"Six months ago we all sat around, I think everyone in the industry, and said where has the money gone?" he added. "There was clearly less volume in the broadcast upfront a year ago and what we see today is just a meaningful shift out of broadcast."

Mr. Zaslav also discussed the potential of Discovery creating an over-the-top streaming-video platform. "The idea of going directly to consumer is something we have every opportunity to do," he said. "We own an awful lot of our content. We have super fan groups. So I think we are very well positioned. We are looking at everything. But I think the marketplace, at least for the next three years is going to stay relatively stable and we'll probably have more people buying our content, and we'll inbound a position if we want to at any moment to start picking off some of those super fan groups."

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