Discovery lends another $50 million to Oprah Winfrey Network

By Steven Overly
Monday, February 14, 2011

Discovery Communications plans to lend an additional $50 million to the Oprah Winfrey Network to bolster its lineup of family-oriented and inspirational programs after strong advertiser support led the company to predict the channel will break even within a year of its January debut.

Chief executive David Zaslav broke the news during a conference call Friday, saying the loan will help OWN "to continue on the path to profitability." That money brings the company's total investment to $239 million, which will be repaid as the network turns a profit.

"Now we're on this journey of building a network and finding a voice," Zaslav said during a conference call. "We'll be launching [programs] over the next year and feathering it in. With advertiser and distributor support, we believe this could be a very compelling asset."

The Silver Spring-based television company announced last year it would replace Discovery Health with a channel whose content would include Oprah's talk show and other series crafted by the entertainment mogul. The network attracted 18 million viewers in its first week, Zaslav said, despite the fact that many of the 24 original programs slated for this year have yet to launch.

The announcement came as the company posted a profit of $680 million, or $1.55 per share, for 2010 , a 20.6 percent increase compared to the $564 million ($1.27) it earned the year before. Total revenue climbed 9 percent from about $3.5 billion in 2009 to $3.77 billion last year. Net income for the fourth quarter reached $208 million, a jump of 33 percent over the same period a year earlier.

"Discovery delivered another year of strong and consistent growth in 2010 as we leveraged our diverse slate of quality content across our worldwide distribution platform in an improving global economic environment," Zaslav said in a statement.

Executives attributed 2010 earnings to the breadth of Discovery's existing shows, including such programs as "What Not to Wear" on TLC and "Deadliest Catch" on Discovery Channel, which has allowed the company to attract sizable male and female audiences. Advertising in both the U.S. and international markets tallied double-digit growth for the year.

Michael Morris, an analyst with Davenport & Co., said the fourth quarter's 13 percent increase in domestic advertising revenue was fairly consistent with other entertainment networks. "They do not have sports content and sports content was the key to out performance for networks," he said.

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