Has been a company director since september 2008 and

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has been a company director since September 2008 and previously served as chairman and CEO of Advance/Newhouse Communications and Bright House Networks. Risks associated with Discovery include the challenging nature of the media business, where success requires accurately anticipating the fickle tastes of audiences, both in the U.S. and internationally. Discovery’s programming is heavily weighted toward non-fiction/documentary and reality style programming, which may not be as popular with audiences as scripted series. The development of original entertainment content, which is required for sustained growth, is also an expensive process. Production costs continue to grow in the mid- to high single-digit range, which could pressure margins. With the Scripps Networks acquisition comes integration risk. While Scripps cable networks are similar to Discovery’s in that they are primarily non-fiction based, Scripps’ lifestyle programming targeting women is very different from Discovery’s general audience and more male-oriented content. Discovery’s cable networks, like all producers of creative content, depend on cyclically sensitive advertising spending, which remains a major component of revenue. In addition, the 10 largest cable and satellite operators currently account for 90% of Discovery’s U.S. distribution revenue. Further consolidation among those firms would increase their already considerable bargaining power, which could impact Discovery’s revenues as old distribution agreements expire and new agreements are renegotiated. As the cable market changes with the rise of over-the-top or digitally distributed virtual multi-channel video distributors like Dish’s Sling, Sony’s PlayStation Vue, Hulu and many others, Discovery channels may not be chosen for premier channel packages (or at all), which could seriously impact distribution revenue. Discovery is also more exposed than many peers to European and developing markets due to its aggressive international expansion. These markets could be weaker in the case of Europe or more unstable in the case of emerging economies than the U.S. market, leading to more variable returns. Media audience fragmentation and the secular shift in advertising dollars away from broadcast television and toward digital platforms have magnified the above-mentioned risks. Unfavorable exchange rate movements may also significantly impact the company’s results. COMPANY DESCRIPTION Discovery operates more than 200 television channels, reaching 2.7 billion viewers in more than 220 countries. Its more well-known cable channel brands include the flagship Discovery Channel, TLC, Animal Planet, the joint venture Oprah Winfrey Network (OWN), and the Eurosport pan-European sports channels. Discovery’s channels primarily focus on nonfiction entertainment content. Legendary media investor John Malone effectively controls Discovery with 29% of the voting shares, though Advance/Newhouse Communications also retains a substantial 25% interest. Discovery acquired Scripps Networks on March 6, 2018. Discovery generates more than 50% of its revenue outside the U.S.
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