Discovery Communications Class A Earnings Call Insights: Acquisition Opportunities and Distribution Renewals
Doug Mitchelson – Deutsche Bank: David, do you see any other interesting acquisition opportunities right now, and for 2013 from your viewpoint, what are the most important execution priorities? I mean, where could – as you’ve laid out your guidance and your outlook, where do you think there is a potential to do better, where do you think there is the risk of doing worse?
David M. Zaslav – President and CEO: In terms of acquisitions, we have a great balance sheet and we have a real opportunity with our existing platforms to grow organically and we’ve been doing that over the last several years. The idea of buying additional assets is, we’re always opportunistic, but we were looking for the past six years and it took us six years to fund Eurosport and SBS switchover. The real focus for us is, we’re only going to do an acquisition if we think we can grow as fast or faster as well as having real strategic value for us. So we will continue to look. If we find assets that meet that formula, we’ll go ahead. But in the meantime, we have expanded our platform dominance and we’re doing a better job I think than we ever have creatively in terms of populating our channels with great storytelling and strong characters and growing our market share. So, I feel like we’re in very good shape right now and we’ll see if anything else comes up. In terms of priorities, I think the number one priority is to continue to grow market share. We are unique in our approach. Last year alone we increased our investment in content by $200 million. But we did grow our market share last year by 8% in a market that was flat. The year before we grew 3% and the year before we grew 7%. So, as we look at this Company, the focus is to continue to deploy capital to take full advantage of the fact that we have 14 channels here in the U.S. and as you look around the world, we have a better platform portfolio than anyone. This past year, we grew 25% market share outside the U.S. including launching a number of new channels where we’re using our existing content. So, if we can continue to grow our market share and continue to create an environment where we have the best creatives working with us to build our brands, you’re going to see a significant amount of growth, because there’s more and more windows for our content and there’s more and more platforms for us to put it.
Doug Mitchelson – Deutsche Bank: Does that suggest that you should be ramping your investment in content even further than you already are?
David M. Zaslav – President and CEO: Well, last year – we’ve taken it up significantly over the last five years, and because we had so much success last year, as you look at Discovery, Animal Planet, ID, TLC, the success that we’ve had, including at Science, we have a lot more returning series than we’ve ever had, and the returning series that are really, that are freshman or sophomore, so we don’t have a lot of older series in our portfolio right now. And so, because of that, you will see this year that we’ll be relatively flat. And that will be significant because we won’t have to go out fishing as much to find new content for two reasons; one, our creative team I think is better than we’ve ever had and we understand our brands and what the viewers are looking for on each channel, but also more importantly, we have a lot of returning series more than we’ve ever had on each channel. So, we are in this odd moment where we could spend about the same amount of money and get a lot more creative content, because remember, that within our business model, when we have series that work, we own those shows for the long haul. So, the additional cost of those shows in season 2, 4, 5, there is no opportunity to come back and really leverage those. And so, that’s a real opportunity for us. So we’ve to level off Doug, and I think that that’ll help with the – you see a big pick-up in amortization this year, you’ll see that level off significantly, because we’re going to be tapering down, but I think we’ll taper down and we’ll accelerate market share.
Benjamin Swinburne – Morgan Stanley: I wanted to ask about the distribution renewals that you talked about Andy in your prepared remarks. Now that they’re behind you, can you tell us how many subs they covered and whether you expect to see sort of cut through all the noise with digital and launch amortization if the affiliate revenue growth will accelerate in ’13 versus ’12? I think it was around 5% in ’12. And David, what was the strategy going in? I think Andy mentioned more distribution, higher fees, but there’s a lot of things you guys get a go for more ad inventory, higher fees in ID in particular and you’ve had a lot of rating strength, what was the sort of goal for the team going in other than just get as much money as possible?
David M. Zaslav – President and CEO: I do think we’re very well-positioned for these discussions. Six years ago our market share was about 4% on cable; today it’s about 10%. We have a lot more channels that have niche audiences that feel that our channels and brands are very important to them, and all of our deals come up at the same time as we’ve discussed. So, I think we have a very good hand. We also have a very good equitable argument with distributors because we’ve spent a lot more on content as our market share has grown, and I think all of our distributors would agree that our channels have become much more important, the viewership is up, they are making more money selling them. So, it was a very good backdrop. For this year, there were just very few deals that came up. We said the deals were going to be coming up over the next – last year – over the next five years, this year it was a smaller percentage. And so we did very well in terms of getting increases in fees well above what’s in our existing deals, which is 45%. In addition, we were able to get more distribution for a number of our channels which helps us when you take a look at ID that was in 55 million homes it’s now in over 80 million homes. That’s becoming a big asset for us. Science that in 45 million homes, that’s in over 70 million homes now. So, we get the increase in rate. We then get paid on those channels that get rolled down and then we get additional ad revenue on the viewership of those channels, but you won’t see a significant bump this year because the scale of the deals that came up were just small and we always mentioned that they feather in over the next four years. So, I think if we do – we expect that we will do as well going forward and you’ll see more of it in ’14 and ’15 as more deals come up. And one other thing; we did not give any TV Everywhere rights as a part of these deals which I think was important for us. We couldn’t determine what the right value was and it was amicable, but we agreed in this case to table it. I think there is a decent chance we’ll do some TV Everywhere deals over the next few months. But the good news is, there is no distributor in the U.S. that has TV Everywhere rights for our content and given that we are almost 10% of viewership on cable, I think that that is a very valuable opportunity. And it’s a good opportunity for us because TV Everywhere is – it’s measured on computers, it will be measured on Pad soon and it provides a good economic model that will be measured for us.
Benjamin Swinburne – Morgan Stanley: So, it sounds like these deals set the stage for that 5% to accelerate, but it’s going to take multiple years as it phases in as the deals get bigger. Is that a fair takeaway?
David M. Zaslav – President and CEO: Correct. And having said that if TV Everywhere – we could do TV Everywhere as a separate basket of consideration or there could be deals that are up next year, the year after in 2015 or ’16 where a distributor wants TV Everywhere rights, where we could either do it independently or we might decide to roll forward a whole new deal as a part of that. But assuming that that doesn’t happen then it will feather in over the next couple of years.
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