Discovery Communications Execs Outline Long-Term Growth Strategy

NEW YORK: Discovery Communications hosted its first-ever Investor Day, during which time the company's senior executives highlighted plans for long-term growth, revealing a projection of reaching 3 billion worldwide subscribers by the end of the year.

“Discovery Communications is like no other media company in the world, with an average of ten channels across more than 220 markets and we are well positioned for near- and long-term growth,” said David Zaslav, the president and CEO of Discovery Communications. “The company stands out in the marketplace due to our efficient global content model; unrivaled international infrastructure run by local teams; and a strong growth position in the U.S. We are confident in the long-term outlook for our business and foresee continued growth in the years ahead, which we expect will produce significant free cash flow and value for shareholders.”

Zaslav highlighted five key differentiators for Discovery’s growth potential: the company’s unique portfolio of assets; ownership/control of a growing and diverse portfolio of content and IP that positions Discovery for the changing media landscape; an international distribution platform that will continue to benefit from positive global trends; a cost-flexible, stable U.S. business that yields continued free cash flow growth; and a strong financial outlook, highlighted by three-year guidance metrics.

Bruce Campbell, Discovery's chief development, distribution and legal officer, gave an overview of the group's global digital portfolio and platform opportunities, highlighted by its direct-to-consumer products in Europe, including Eurosport Player and DPlay. He also announced the upcoming launch of an authenticated TV Everywhere offering for Discovery Kids in Latin America, called Discovery Kids Play.

Jean-Briac (JB) Perrette, the president of Discovery Networks International (DNI), focused on DNI’s three-part strategy: grow audience and share; own and control must-have IP; and create and expand powerful and loved brands. Perrette described how Discovery’s global and local infrastructure with a low-cost model that leverages content around the world will support the division’s continued strong growth, including continued increases in pay-TV global subscribers and earning more for multichannel advertising.

Peter Hutton, the CEO of Eurosport, outlined the company's strategy to grow the Eurosport brand; expand the audience and reach of Eurosport; and plans to leverage sports to drive revenue across the entire portfolio. Commenting on Discovery's acquisition of the exclusive, multiplatform rights to the Olympic Games across Europe, Hutton explained that Eurosport's programming schedule is nearly 50 percent Olympic sports.

Marinella Soldi, the managing director for Southern Europe, highlighted the diversity of the European media landscape and how Discovery has used local teams and tailored strategies to propel growth and outperform competitors, even in challenging economic environments. She highlighted Italy, where Discovery is now the third biggest media company in terms of share, and how this scale has driven value and growth through an improved power ratio.

Fernando Medin, the general manager for Brazil and Southern Cone, shined a spotlight on the Latin America region. Discovery was an early entrant in Latin America, and has an established leadership position with genre categories such as male nonfiction, lifestyle and kids. Medin noted Brazil, where Discovery has a portfolio of 11 channels, and where Discovery Kids is both the number one channel for kids and the number one pay-TV network overall.

Andrew Warren, Discovery's chief financial officer, discussed the "cost-flexible nature" of Discovery’s U.S. business, with 79 percent of the segment’s content spend, its single largest expense, involving contracts of less than 12 months. Warren also spoke to the U.S.’s stable financial profile and ability to continue to drive AOIBDA growth.

Rich Ross, the group president of Discovery Channel, Animal Planet and Science Channel, touched upon Discovery Channel’s growing audience and creative momentum, its recent record-breaking success, including its number one ranking this summer among males 25 to 54, and previewed several new series and specials.

Henry Schleiff, the group president of Investigation Discovery (ID), American Heroes Channel and Destination America, highlighted ID’s strong brand, global distribution advantage, and industry high volume of more than 650 hours of original production at an industry low cost per hour. He noted that ID is the number three cable network for women in the U.S. and boasts the longest length of tune in all of television.

Bob Scanlon, the general manager of Velocity and automotive content, talked about the network's dominance in the car category. Velocity, which is called Turbo internationally, ranks as the number one network for men 25 to 54 in U.S. homes under 70 million subscribers and number one in U.S. cable subscriber growth overall. Globally, Turbo is now available to 126 million subscribers in 53 countries and is projected to grow to 220 million subscribers in 163 countries by the end of the decade.

Warren also provided the following update to the company’s full year 2015 financial outlook: constant currency revenues is expected to be up 9 to 10 percent; constant currency AOIBDA is expected to be up mid-single digits; constant currency adjusted EPS is expected to be up low double digits; and free cash flow is expected to be up low single digits. Warren added: “Third quarter results are on track, highlighted by strong U.S. advertising growth. We are pleased that we are delivering on our 2015 commitments and are confident that we are well positioned to continue to grow adjusted EPS in the long-term. In addition, our model generates significant free cash flow, and we expect to have approximately $10 billion in available capital over the next five years.”