Discovery Streaming Portfolio Reaches 15M Subscribers, But Advertising Decline Hits Q1 Results

Discovery Communications says its streaming portfolio, led by Discovery+, has racked up 15 million paying subscribers — 2 million of them in April alone.

Despite the upbeat digital trend, the company’s first-quarter results were hurt by a decline in advertising revenue, for decades the financial lifeblood of the TV programmer. Operating income fell 24% to $837 million, while diluted earnings per share fell by more than half from year-ago levels, to 21 cents.

Total revenue met Wall Street expectations, rising 4% to $2.79 billion. In the U.S., ad revenue dropped 4%, while proceeds from distribution gained 12%. In its earnings release, the company said the ad slide was “primarily due to lower overall ratings, and to a lesser extent secular declines in the pay-TV ecosystem and lower inventory.”

Internationally, the ad story was more favorable, with revenue rising 16% (or 8% without currency exchange effects) to $435 million.

Discovery+ launched last January in the U.S. and other global territories and is continuing its expansion. The streaming service is a venue for original programming as well as tens of thousands of episodes from the company’s networks, including its Discovery flagship, TLC, Food Network and HGTV. In addition to Discovery+, the company operates a number of niche-oriented services targeted to golf, cooking, motorsports and other interests.

Total streaming reached 13 million by the end of the quarter, the company said, before adding 2 million more through the last week of April.

In rolling out Discovery+, the company has not broken it out its subscriber numbers or announced the kind of subscriber projections that its media industry peers have offered. CEO David Zaslav said its progress to date has exceeded internal expectations.

Like other media companies, Discovery is balancing the potential of direct-to-consumer streaming with the still-lucrative dual revenue stream offered by pay-TV. While its networks remain highly penetrated in the U.S. and globally, there is a secular decline in pay-TV subscriptions overall, which hit double digits in 2020 and are expected to continue. The task for Discovery is to grow streaming more quickly than the traditional business declines.

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