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Discovery’s Q3 international revenues hit $950m, Olympic cost timeline outlined

Discovery, the US-based media group that owns pan-European sports broadcaster Eurosport, has reported third-quarter revenues of $950m (€860m) at its international division, a 4-per-cent rise on the equivalent figure announced 12 months ago.

Third-quarter advertising revenues at the International Networks division totalled $394m, a 5-per-cent uplift (or 10-per-cent increase excluding foreign currency effects). Distribution revenues were $520m, a 2-per-cent rise (or 8 per cent excluding foreign currency effects).

Advertising growth was partly attributed to expansion of digital content offerings and “to a lesser extent, higher pricing in certain markets in Europe”.

Discovery said that the distribution growth was due to “certain content licensing agreements, contractual price increases and new channel launches in our Latin American region, increases in our Latin American region, increases in digital licensing revenues and growth in Europe related to increases in pricing and monetisation of digital content offerings.”

The overall revenue rise at International Networks represents a 10-per-cent increase when foreign currency effects are stripped out.

Meanwhile, International Networks’ operating income before depreciation and amortisation (OIBDA) fell by 7 per cent to $237m. Excluding foreign currency effects, the figure rose by 5 per cent.

The figures were presented today (Thursday) by Discovery’s top brass as the group’s leading executives also discussed the impact of Discovery’s Olympics media-rights contract in Europe on next year’s finances. Discovery holds the rights in Europe (with the exception of Russia) in a €1.3bn ($1.41bn) contract that runs from 2018 to 2024.

Gunnar Wiedenfels, Discovery’s chief financial officer, said: “We’re going to see about 30 per cent of the total rights costs for the Olympics come through next year so that is a significant chunk of expenses that are going to hit the third quarter.

“We’re exploiting these rights across all levers – sublicensing, advertising, affiliate deals and then our own direct-to-consumer [platforms]. Those revenue deals are all contributing to the monetisation but obviously over a longer term while the expenses are going to hit in the third quarter.

“It’s also fair to say that given this is later in the year, we’ll have less time in the year 2020 to recoup some of those investments. Especially if you look at [Eurosport] Player revenues from additional subscribers, affiliate renewals etc. Those are longer-term impacts on the top line.”

David Zaslav, Discovery’s president and chief executive (pictured), underlined the wider importance of the contract to the company. He noted: “It’s one of the reasons the PGA Tour came to us [to sign a 12-year digital and rights tie-up] and it’s the reason why [IOC president] Thomas Bach came to us to innovate.”

Looking ahead to the Tokyo 2020 Olympics, JB Perrette, president and chief executive of Discovery Networks International, highlighted the “additional value streams” created by the Olympics deal. These include, he said, using the Games window as a “promotional vehicle” to promote other Discovery programming, the spike in Eurosport Player subscriptions and driving audience to Discovery’s other OTT platforms (including Dplay and Motor Trend).

Ahead of the PyeongChang 2018 winter Olympics, the first covered by Discovery’s landmark rights contract, Eurosport Player passed the one-million subscriber threshold. Discovery announced swiftly afterwards that Eurosport Player and Dplay added nearly 500,000 subscribers during the games. However, many of the subscribers are likely to have signed up for a free promotional offer and may not have been retained.

Third-quarter revenues at Discovery’s US Networks division rose by 3-per-cent to $1.73bn. The figure includes advertising and distribution revenues of $1.02bn and $681m, respectively. Adjusted third-quarter OIBDA at US Networks increased by 12 per cent to $1bn.

Discovery’s total third-quarter revenues rose by 3 per cent to $2.68bn, while net income was $262m.

Zaslav said: “Discovery once again delivered strong financial results across our portfolio, generating healthy revenue growth in the US and internationally, and significant operational efficiencies from our ongoing transformation efforts.

“We also made progress in the buildout of our digital ecosystems that leverage our owned programming and brand strength. With a solid financial profile and strong balance sheet, we are able to invest meaningfully in our business and create additional value for shareholders.”