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Discovery Unveils Plans for Streaming Service as Q2 Profits Fall

Discovery said it planned to unveil a new direct-to-consumer streaming service even as its said its second-quarter net income fell 71% after the coronavirus pandemic spurred a pullback in advertising at both its U.S. and international operations.

The company plans to unveil “a differentiated service” in coming weeks that will focus on non-fiction and unscripted content, said David Zaslav, Discovery’s CEO, during a call with investors Wednesday. He did not offer a launch date for the service. But he said the new offering would provide an alternative to current direct-to-consumer outlets like Netlifix and Disney Plus that focus more heavily on “scripted series and scripted movies.” Discovery’s service, he said, will be a “differentiated service” that will be ‘useful ever day” wtih “all the characters that you love,” said Zaslav, He predicted the new outlet would be seen as “a great value” and called it “a terrific companion.”

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He indicated the Discovery service would also include a library of series devoted to natural history, animals and the environment – topics the company has tilled for years through its flagship Discovery Channel.

“Who would not want what we have?” asked Zaslav. ‘We are going to be hitting that road pretty soon.” He did not say whether the new service would be supported by commercials and did not say whether the company’s soon-to-launch Magnolia network – based on the work of home-improvement celebrities Chip and Joanna Gaines – would be part of it.

The New York owner of the Discovery, Food Network and HGTV cable networks, said it posted second quarter profit of $271 million or 40 cents per share, compared with $947 million, or $1.33 a share, in the year-earlier period. Adjusted for one-time items, the company reported profit in the period of 77 cents per share.

Meanwhile, revenue fell 12% during the period, to $2.54 billion compared with nearly $2.89 billion in the year-earlier period, largely due to a 14% decline in advertising at its U.S. operations.

The results were better than what Wall Street had expected. Analysts had called for earnings of 75 cents per share.

The company is seeing “initial signs of stabilization” in “many of our key markets,” said Zaslav, in a statement, indicating that Discovery intended to “resume returning capital to shareholders through share repurchases.” He said the company was “cautiously optimistic about the global outlook for the rest of the year.”

Discovery said revenue from distribution rose in the U.S. and noted U.S. operating expenses fell 6%. Distribution was off internationally by 2%, due to the loss of live sporting events the company broadcasts overseas. Operating expenses were down 20%, due in part to the loss of sports.

 

 

 

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