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Discovery Q1 revenues dip as Zaslav underlines force majeure rights protection

Discovery, the US-based media group that owns pan-European sports broadcaster Eurosport, has reported first-quarter revenues of $923m (€854.7m) at its international division, a 3-per-cent fall on the equivalent figure announced 12 months ago.

First-quarter advertising revenues at the International Networks division totalled $376m, a 4-per-cent drop. Distribution revenues were $515m, a 2-per-cent year-on-year fall.

Speaking to analysts today (Wednesday) upon presentation of the results, David Zaslav, Discovery’s president and chief executive, suggested that the broadcast group is well protected in terms of financial commitments that must be made – or not – following the postponement or cancellation of a host of sports events to which it holds the rights.

Zaslav said: “Having no sports is a challenge for all of us but 90 per cent of our deals have either force majeure provisions or provisions that specifically relate to us not paying for content that we don’t get.”

The Tokyo 2020 Olympics have been the most high-profile event to be postponed because of the Covid-19 pandemic, with Discovery holding the rights in Europe (excluding Russia) from 2018 to 2024 in a €1.3bn ($1.4bn) deal.

Elsewhere, Discovery is seeking to terminate its Bundesliga contract, utilising a reported ‘special termination’ clause, but now faces the threat of legal action from the German Football League (DFL).

On the deferral of Olympic costs following the Games’ postponement by 12 months, Discovery said: “The Company expects that the postponement of the Olympic Games will shift Olympic-related revenues and defer significant expenses from fiscal year 2020 to fiscal year 2021.”

Zaslav told analysts that the rescheduled Tokyo Olympics could be a “little better” for Discovery as “one of the issues with the Olympics [normally] is they are separated by such a long period of time”. He said that proximity of the Tokyo Games and the Beijing 2022 winter Olympics would allow Discovery to build its digital direct-to-consumer platform and attract advertisers for both Games together.

International Networks’ operating income before depreciation and amortisation (OIBDA) fell by 5 per cent to $207m. The discontinuation of pay-television distribution agreements in the Nordics affected advertising and distribution revenues alike.

First-quarter revenues at Discovery’s US Networks were up slightly to $1.756bn. The figure includes advertising and distribution revenues of $1.026bn and $708m, respectively. Adjusted third-quarter OIBDA at US Networks fell by 4 per cent to $1.016bn.

Discovery’s total first-quarter revenues fell by 1 per cent to $2.68bn.

Having drawn down $500m of its $2.5bn credit facility in the wake of the Covid-19 crisis, Discovery has now taken further measures.

The broadcaster said today: “On April 30, 2020, to preserve flexibility in the current environment, the company reached an agreement with its lender group, led by Bank of America, N.A., to amend certain provisions of its revolving credit facilities, including resetting the Maximum Consolidated Leverage Ratio to 5.5x from the third quarter of 2020 until the first quarter of 2021.”