Though Discovery Communications’ Q2 report showed earnings up 15.4 percent from last year, the company plans to slow its production during Q3. According to AdWeek.com, Discovery Communications CEO David Zaslav indicated that the cultural appeal of the Olympics has affected the number of premieres the company will release on its networks during the third quarter, including its flagship network, the Discovery Channel. What does this mean for customers? How will the slow down affect Discovery Communications’ 2012 profits?
Looking At Q2
According to Discovery Communications’ Corporate Press Release, the Q2 earnings report showed a net income of $293 million, which was 15.4 percent higher than the amount reported for Q2 2011. Total revenues also increased by 7 percent from the same quarter last year, with an ending value of $1.14 billion. Though the company’s overall revenue fell slightly short of the $1.16 billion analysts had originally predicted for this quarter, Discovery Communications’ Q2 net income was significantly higher than the same analysts had expected. While financial analysts had predicted earnings of only 70 cents per share for Discover Communications during Q2, the quarterly report showed actual earnings to equal 76 cents per share.
During Q2, Discovery Communications’ dramatic increase in revenue was largely a result of the popularity of some of its younger networks, with a significant amount of praise going to Investigation Discovery. Established channels, on the other hand, such as the Discovery Channel and TLC, saw a decline in viewership during Q2. The company also experienced some losses on OWN during this quarter, though CEO Zaslav promises that the OWN network will become profitable by the end of the year.
While discussing Q2, Zaslav also stated that, while the Olympics remain on the air, the company will be taking a conservative approach with new programming. According to Zaslav, the cultural momentum of the Olympics makes it unwise for Discovery Communications to release competing programs. Since the company’s established networks are already experiencing a diminished number of viewers, they can’t afford to lose any more to the Olympics.
Slowing Down to Jump Ahead
Although Discovery Communications will be limiting production for Q3, this doesn’t mean that they are cutting back in the long-term. Zaslav clearly stated that the slowdown at the Discovery Channel and other Discovery Communications networks is only temporary. The strategy is intended to maximize the number of viewers who will watch premieres on Discovery Communications networks by holding out until after the Olympics have ended. Though it may be frustrating for consumers who are already anticipating certain premieres, it will increase the number of viewers who tune in impulsively.
As further evidence that Discovery Communications is far from going under, Zaslav also stated that the company will be pouring more money into marketing and new content during the final quarters of this year. It will be focusing these efforts primarily on its growing networks, such as Velocity, Military and Investigation Discovery, in order to take full advantage of their strong appeal to viewers.
Though Discovery Communications was dealt some blows on its older networks during the second quarter, the numbers speak for themselves. Furthermore, the company has big plans to increase its profits and raise viewership numbers in the months to come.