Discovery, the owner of Food Network, HGTV and TLC, reported first-quarter results that fell short of Wall Street’s projections over costs related to the launch of its streaming service Discovery + and a drop in ad sales.
Discovery’s shares fell more than 7 percent on the news on Wednesday. It recently declined 5.9 percent to $ 36.65 per share.
The New York-based firm said net income rose 63 percent to $ 140 million in the quarter, or 21 cents per share, missing analysts’ expectation of 65 cents per share.
Revenue also rose 4 percent to $ 2.79 billion, with ad sales falling 4 percent in the quarter.
Discovery owner David Zaslav said the drop in ad sales was “mainly due to lower overall ratings” and lower ad inventory – not a systematic decline in pay TV or cord cutting.
The reduced ad inventory was due to the company’s part of its promotion for its new Discovery + service, which was occupying advertising space on its network. The streaming service launched on January 4 with ads at $ 5 per month and $ 7 for the ad-free version.
The CEO downplayed the decline and emphasized the importance of the streaming service, from various network shows such as Oprah Winfrey’s “Super Soul”, TLC’s “90 Day Fiancé” and Chip and Joanna Gaines’ home remodeling series, “Fixer Upper Keeps with you. “
“The global rollout of Discovery Plus is off to a great start by any measure,” Zaslav said. “Key metrics, including customer engagement, customer engagement and retention, exceeded our expectations and are demonstrating continued momentum in the second quarter.”
Zslav said the service ended the first quarter in March with more than 13 million subscribers, up from 11 million subscribers in February.
The CEO said there are many growth opportunities for Discovery +, including new markets such as Italy, Germany and Brazil, adding that he sees “a healthy transition in our revenue trajectory” thanks to the growth of the streaming service.
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