Discovery’s U.S. networks see Q1 earnings growth despite subscriber losses

finance earnings
U.S. networks' revenues increased 3% to $829 million, thanks in part to 5% distribution growth and 1% advertising growth.

Discovery Communications’ U.S. networks unit saw its first-quarter revenues increase in spite of what the company called a “slight decline” in subscribers.

U.S. networks' revenues increased 3% to $829 million, thanks in part to 5% distribution growth and 1% advertising growth. That growth was driven primarily by higher rates and helped to offset the loss of subscribers. The uptick in advertising revenues was due to higher pricing and Discovery’s ability to monetize its GO platform.

Operating expenses for the segment decreased 2% year over year thanks to lower content amortization and impairment costs, lower personnel costs, and the impact of the Group Nine transaction, partially offset by higher marketing and research costs, according to a news release.

"Improved ratings across many of Discovery's key distinctive programs and brands, coupled with strong global distribution growth, led to solid organic growth in the first quarter," said Discovery Communications President and CEO David Zaslav in a statement. "Beyond our linear business, we continue to focus on new strategic partnerships and investments to help drive our multiplatform growth strategy and ensure that we reach our global superfans on every screen."

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While domestic results were somewhat mixed, Discovery’s international networks revenues rose 5% to $747 million and adjusted OIBDA increased 7% to $194 million. Discovery’s investment in sports overseas helped benefit the company’s international distribution revenues, which rose 10% annually thanks to higher affiliate fees in Europe, and higher affiliate fees and subscriber growth in Latin America. However, operating expenses increased 5%, or 9% excluding the impact of foreign currency exchange rates, primarily due to increased sports and other content and production costs.

In all, Discovery’s first-quarter revenues rose 3% to $1.6 billion. But net income decreased 18% to $215 million as a result of higher losses due to the timing of the company’s solar investments. Discovery expects those investments to have a positive impact on net income for the full year.