Discovery Communications, Inc. (DISCA)

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Discovery Holding Co. CI A (DISCA)

Q4 2010 Earnings Call

February 11, 2011 8:30 am ET


David Zaslav – President, Chief Executive Officer

Brad Singer – Chief Financial Officer

Peter Liguori – Chief Operating Officer

Craig Felenstein – Senior Vice President, Investor Relations


Doug Mitchelson – Deutsche Bank

John Janedis – UBS

Jessica Reif Cohen – Bank of America Merrill Lynch

Ben Swinburne – Morgan Stanley

Richard Greenfield – BTIG

Michael Nathanson – Nomura

David Bank – RBC Capital Markets

David Joyce – Miller Tabak & Company

Jason Bazinet – Citigroup

Tuna Amobi – Standard & Poor’s Equity Group

Anthony Diclemente – Barclays Capital

Michael Morris – Davenport & Company

David Miller – Caris & Company



Good day ladies and gentlemen and welcome to the Fourth Quarter 2010 Discovery Communications Incorporated Earnings conference call. My name is Shequana and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will facilitate a question and answer session towards the end of this conference. If at any time during the call you require assistance, please press star, zero and a coordinator will be happy to assist you.

I would now like to turn the presentation over to your host for today’s call, Mr. Craig Felenstein, Senior Vice President of Investor Relations. Please proceed, sir.

Craig Felenstein

Thank you, Shequana. Good morning everyone and welcome to Discovery Communications Fourth Quarter 2010 Earnings call. Joining me today is David Zaslav, our President and Chief Executive Officer; Peter Liguori, our Chief Operating Officer, and Brad Singer, our Chief Financial Officer. Hopefully you have all received our earnings release, but if not, feel free to access it on our website at

On today’s call, we will begin with some comments from David and Brad, after which we will open the call up for your questions. As is customary, before we start I would like to remind you that the comments today regarding the Company’s future business plans, prospects and financial performance are forward-looking statements that we make pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are made based on management’s current knowledge and assumptions about future events and may involve risks and uncertainties that could cause actual results to differ materially from our expectations. In providing projections and other forward-looking statements, the Company disclaims any intent or obligation to update them. For additional information on important factors that could affect these expectations, please see our Form 10-K for the year ended December 31, 2009 and our subsequent filings made with the U.S. Securities and Exchange Commission.

And with that, I’ll turn the call over to David.

David Zaslav

Thanks, Craig. Good morning everyone and thank you for joining us for our year-end earnings call. It’s a great opportunity to review Discovery Communications strong financial results from this past year, reflect on the strategic steps we took throughout 2010 that position us for sustained growth in the year ahead, and discuss some of our top priorities for 2011.

A year ago, we demonstrated how Discovery’s unique business model enabled us to outperform and deliver sustained growth despite the difficult environment. In 2010, that growth accelerated significantly, a clear indication of our ability to capitalize on a more robust marketplace by leveraging our high quality content across our global distribution platform. Brad will take you through our fourth quarter results in a few moments, a strong finish to a year in which Discovery once again generated consistent and diverse growth with both domestic and international platforms delivering advertising and subscription increases. The end result for 2010 was 9% top line revenue growth, and we continued to demonstrate real operating leverage, controlling costs and delivering margin expansion from double-digit OIBDA growth.

The financial success of this past year is just part of our story. We generated strong returns while simultaneously positioning the Company for future growth as we continue to strategically invest in our content and brands around the globe. The result was significant progress in further developing our next generation of growth assets, both from the ratings and advertising gains at several of our emerging networks as well as from launching our joint ventures.

Let me highlight a few of these investments from 2010 and what we plan to do for each initiative in 2011. Throughout this past year, you have heard us talk about the rapid audience gains at ID – Investigation Discovery. That growth has continued to accelerate. ID was the fastest growing network in all of cable this past year in both distribution and viewership, something I haven’t seen in my 25 years in the cable business. ID’s prime time viewership was up 64% among adults 25 – 54, and in the fourth quarter it was the number 29 ad-supported cable network for women. Just last month, it hit another major milestone with four shows delivering over a 1 rating, including On the Case with Paula Zahn, and Stolen Voices Buried Secrets. ID is clearly resonating with viewers and is delivering real value to our affiliate and advertising partners.

ID now has distribution in over 70 million homes with firm commitments to get to 80 million homes this year. With 80 million subs locked in and sustained ratings momentum, ID is poised to deliver even stronger ad growth in 2011 and we plan to further invest in this channel to exploit its full potential. We are convinced ID can be a Top 20 network.

ID was not the only network which significantly grew its audience this past year. Our investment in Animal Planet resulted in viewership gains of 7% this past year among adults 25 – 54. Animal Planet has steadily become a much broader and diverse brand. Its two highest-rated series, Whale Wars and River Monsters, both delivered double-digit prime time viewership growth this past season, and it added several new hits including Fatal Attractions, Animal Hoarders, and Pitbulls and Parolees. It is delivering real advertising growth, and with more returning series than ever before and a great upcoming slate that includes Taking On Tyson, premiering next month, Animal Planet should continue to expand its audience and advertising in the upcoming year.

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