Discovery’s international business suffers declines

Revenues and profit have taken a hit at Discovery Communications’ international business, with the US-listed channel operator blaming exchange rates and increased costs at its Eurosport operation.

Discovery’s international revenues had started to eclipse those from the US, but the domestic business is once again generating more than the global operation.

Currency fluctuations were one of the key causes for the negative results.

The most notable shift in international exchange rates has been in sterling, although Discovery did not single out the UK, which is its single largest international business.

It has previously said Brexit had caused an international slowdown, but did not reference the UK’s decision to leave the European Union in its latest results.

“While we faced challenging but expected headwinds this quarter, Discovery is well positioned for long-term growth driven by our well-defined global brands, differentiated content and favourable distribution agreements,” said David Zaslav, president and CEO, Discovery.

International revenues in the quarter to end-September were down 3% at US$720 million and OIBDA profit slipped 16%, taking the total to US$183 million. Across the first nine months of the year, revenues were down 2% at US$2.2 billion, and OIBDA 12% at US$617 million.

The factual and entertainment giant said that overall international revenues would have been slightly up were it not for the currency issues. Specifically, channel distribution revenues would have increased, with higher carriage fees coming through in Latin America, northern Europe and the CEE, and Middle East and North Africa region.

International advertising revenues were down on the currency effects and lower ratings and pricing in northern Europe.

Reduced revenues from sub-licensing Eurosport’s sports rights also hit Discovery’s sales, as did increased costs associated with buying and producing sports programming. Discovery and Eurosport have the European rights to the Olympic Games between 2018-2024.

Zaslav added: “We have continued to strengthen and maximise our traditional pay-TV offering with robust new programming while aggressively exploiting new opportunities to leverage our content across numerous digital platforms around the world. Amid an ever shifting global media ecosystem, Discovery is evolving to reach more consumers on more screens and platforms than ever before.”

Revenues and profit were up at the domestic US business with higher affiliate fee pricing driving distribution and offsetting a 3% reverse in ad revenues, which Discovery said was due to expected ratings declines.

Factoring in the international declines, quarterly revenues were fractionally down at US$1.56 billion, and profit down 2% at US$562 million. In the nine months to end-September revenues and profit were up 2% and 1% respectively at US$4.8 billion and US$1.8 billion.