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Discovery eyes $10 bn cash in next 5 years, 3 bn subs base by year end

MUMBAI: US infotainment major
Discovery Communications has set a
target of $10 billion in capital in the
next five years and a worldwide
subscriber base of three billion by the
end of this year.
Discovery president, CEO David Zaslav
said that with an average of 10
channels across more than 220
markets, Discovery is well positioned
for near- and long-term growth.
“The company stands out in the
marketplace due to our efficient
global content model; unrivalled
international infrastructure run by
local teams; and a strong growth
position in the US. We are confident in
the long-term outlook for our
business and foresee continued
growth in the years ahead, which we
expect will produce significant free
cash flow and value for
The company hosted its first
‘Investor Day’ in New York City where
global leaders from Discovery’s
management team discussed their
strategies to drive growth and create
shareholder value with over than 300
attendees, including investors,
financial analysts and industry

Strong financial outlook

Talking about the company’s strong
performance across verticals this
year, Discovery CFO Andrew Warren
said, “Third-quarter results are on
track, highlighted by strong US
advertising growth. We are pleased
that we are delivering on our 2015
commitments and are confident that
we are well positioned to continue to
grow adjusted EPS in the long term.
In addition, our model generates
significant free cash flow, and we
expect to have approximately $10
billion in available capital over the
next five years.”
For the full year, Discovery’s
constant currency revenues is
expected to be up 9–10 per cent,
while constant currency AOIBDA is
expected to be up mid-single digits,
and free cash flow is expected to be
up low-single digits.
“Year over year currency impact is
now expected to be approximately
$460 million, $180 million and $0.24–
0.29 to revenues, Adjusted OIBDA and
Adjusted EPS, respectively,” Warren
Additionally, the company also set
forth the long-term financial
guidance of low double-digit constant
currency-adjusted EPS compound
annual growth rate (CAGR) from 2015
to 2018 and low double-digit free cash
flow CAGR from 2015 to 2018.

A differentiated model to create value

According to Zaslav, the company
would reach three billion cumulative
worldwide subscribers by the end of
the year.
He also highlighted five key
differentiators for Discovery’s
growth potential—the company’s
unique portfolio of assets;
ownership/control of a growing and
diverse portfolio of content and IP; a
leading international distribution
platform; a cost-flexible, stable US
business that yields continued free
cash flow growth; and a strong
financial outlook, highlighted by, for
the first time, three-year guidance
The company’s chief development,
distribution and legal officer Bruce
Campbell gave an overview of
Discovery’s global digital portfolio
and platform opportunities,
highlighted by its direct-to-consumer
products in Europe including Eurosport
Player, the No. 1 sports OTT service
across Europe, and DPlay, featuring
diverse entertainment content and
live events.
Campbell also announced the upcoming
launch of an authenticated TV
Everywhere offering for Discovery
Kids in Latin America, called Discovery
Kids Play.

Sports and Olympics to propel growth

Eurosport CEO Peter Hutton talked
about the company’s strategy to grow
the Eurosport brand and plans to
leverage sports to meaningfully drive
revenue across the entire portfolio.
Explaining the differences between
European and US sports rights, Hutton
said that Eurosport is not dependent
on any single franchise and that it
has locked in long-term rights at low
inflation levels.
Commenting on Discovery’s
acquisition of the exclusive,
multiplatform rights to the Olympic
Games across Europe, Hutton said
that Eurosport’s programming
schedule is nearly 50 per cent Olympic
sports, giving it the opportunity to
tell stories about the characters and
events all year long.
He said that the Olympic Games will be
profitable and cumulative cash flows
will be positive for Discovery over the
term of the agreement, with
sublicensing fees covering 70 per cent
of the economics. Hutton also noted
that talks have already begun with
traditional and new distribution
partners, such as mobile and digital.

Leading international distribution

Discovery Networks International
president Jean-Briac (JB) Perrette
focused on Discovery Networks
International’s three-part strategy
—grow audience and share; own and
control must-have IP; and create and
expand powerful and loved brands.
Perrette described how Discovery’s
unique global and local infrastructure
with a low-cost model will support the
division’s continued growth, including
continued meaningful increases in pay
TV global subscribers and more
earnings for multichannel advertising.
Additive growth across Europe
Discovery Southern Europe MD
Marinella Soldi described the diversity
of the European media landscape and
how Discovery has used local teams
and tailored strategies to propel
growth and outperform competitors,
even in challenging economic
She explained the three types of
markets in terms of pay TV: ‘Mature
but stable’ with distributors finding
new ways to grow; ‘Growth’ markets
where pay TV subscribers are growing;
and ‘Low penetration’ markets where
a large number of households have
never seen pay TV, which created the
opportunity for Discovery to launch
‘thematic’ free-to-air channels
programmed with its global content
Soldi also explained how the legacy big
broadcasters in markets across Europe
continue to lose viewing share to
themed channels and how Discovery is
benefitting from this trend in terms
of gaining its ‘fair share’ of ad

Discovery India

While the India business was not
discussed on the Investor Day, India
happens to be one of the most
important markets for Discovery
Communications’ international
business. Discovery recently
completed 20 years of operation in
India and has widened its footprints.
The broadcaster operates in six
genres through 11 networks and
reaches out to a cumulative 240
million homes in five languages (Hindi,
English, Tamil, Telugu and Bangla).

Discovery eyes $10 bn cash in next 5 years, 3 bn subs base by year end

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