Discovery committed to OWN despite US$50m cost

Discovery CEO David Zaslav has said the company is committed to Oprah Winfrey JV channel OWN despite recording a US$50 million cost largely associated with operating losses at the channel.

“We’re committed to the business,” Zaslav told analysts. “We think this has an opportunity to generate significant asset appreciation for us and for Oprah over the long term.”

Discovery reported net income of US$221 million in its first quarter results yesterday, a year-on-year decline of US$84 million as it started recording all of OWN’s losses in its results for the first time. However, Zaslav said the company will spend less on the channel this year and it is on track to be cash-flow positive by end-2013.

“Despite what you read, we’re making real progress. We grew 14% in the first quarter. I’ve launched a lot of networks and here we are 14 months [since launch] and we’re beating 2/3 of the existing networks in the US,” Zaslav said. “I feel better about where we are than I ever have.”

Own is currently about the thirtieth ranked cable network in the US and in about ten million homes. Discovery CFO Andrew Warren noted that it should start generating more in carriage fees this years as three affiliate deals come up for renewal.

Meanwhile, Discovery reported strong growth among its international channels. Revenue increased 18%, taking the total to US$380 million and profit was up 19%, taking the first-quarter total to US$171 million.

Zaslav said the company’s international business was a true differentiator for it in the market. Latin America and Asia are among the particular growth hotspots, Discovery said. “Brazil grew 766,000 subscribers in the first quarter,” he noted. “That’s more subscribers than the US has added in three or 4 years. So we’re seeing real growth across Latin America, Russia, India.”