Discovery sees ad revenues drop as COVID-19 takes its toll

Discovery saw its revenues drop by 12% overall in Q2 to US$2.541 billion as the COVID-19 pandemic hit ad sales in particular. OIBDA dropped by 11% to US$1.127 billion with a particular hit from international markets.

David Zaslav

The drop was expected, and Discovery exceeded analysts’ expectation for revenue numbers and earnings per share. CEO David Zaslav said the company was seeing “initial signs of stabilisation” in “many of our key markets” and that Discovery would resume returning capital to shareholders through buybacks.

US distribution revenues were up by 7% but ad revenues fell by 14%. International distribution revenues dropped by 2%, but ad revenues plummeted by 37%, excluding currency movements.

The programmer said that ad revenues dropped primarily due to COVID-19 and, “to a lesser extent”, from the decline in the pay TV ecosystem overall.

It warned that ad revenues, which represented 54% of consolidated revenues in 2019, may continue to decline significantly throughout the remainder of 2020.

The company’s earnings release sidestepped speculaton about the likelihood of next year’s Olympic Games in Tokyo being cancelled completely, noting only that it expected that the current postponement of the Olympic Games will shift Olympic-related revenues and defer significant expenses from fiscal year 2020 to fiscal year 2021.

The increase in US distribution revenue was driven by ncreases in contractual affiliate rates and certain non-recurring items, partially offset by a decline in linear subscribers.

Overall subscriber numbers were down by 5% year-on-year.