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Those who tell the stories rule the world. ~ Hopi Native American Proverb DISCOVERY COMMUNICATIONS 2012 ANNUAL REPORT If you don’t know the trees you may be lost in the forest, but if you don’t know the stories you may be lost in life. ~ Siberian elder DISCOVERY COMMUNICATIONS 2012 ANNUAL REPORT Life itself is the most wonderful fairy tale of all. ~ Hans Christian Andersen DISCOVERY COMMUNICATIONS 2012 ANNUAL REPORT It all begins, I’ve come to believe, with an overpowering sense of curiosity. ~ John Hendricks DISCOVERY COMMUNICATIONS Canada United States Latin America 2012 ANNUAL REPORT Europe Asia Middle East Africa Australia New Zealand 155 Worldwide Networks 45 Languages 218 Countries & Territories 1.8 Billion Cumulative Subscribers DISCOVERY COMMUNICATIONS 2012 ANNUAL REPORT Dear Shareholders, A love of storytelling – to educate, to enlighten and to entertain – is as old as mankind itself. Along with an innate sense of curiosity, it is one of the defi ning characteristics we share as human beings, across borders and languages around the globe. It also is at the core of Discovery Communications’ mission, and has been since the company’s inception. As technology evolves and economies ebb and fl ow, our worldwide fascination with great stories remains as strong as ever, and Discovery’s underlying focus also remains the same: delivering long-term value by investing in high-quality content – with great stories and compelling characters that ignite curiosity and deliver the thrill of discovery – which can be leveraged around the globe and across a growing number of traditional and digital consumer platforms. The success of this strategy was never more evident than in the record results Discovery delivered in 2012, driven in large part by market share gains in the U.S. and around the world, as we strengthened existing brands such as Animal Planet and Investigation Discovery, launched new brands such as Destination America, and extended strong brands globally such as Investigation Discovery in Latin America and Discovery Kids in Asia. At the same time, the health of the company’s balance sheet and its continued fi nancial and operational momentum enabled Discovery to make several strategic investments that we believe will create additional long-term value and further strengthen our growth profi le, even as we continue to return capital to shareholders through our share repurchase program. Overall, for the year, Discovery repurchased a total of $1.4 billion in stock, and, while our fi rst priority remains investing in our core businesses and exploring external initiatives to drive sustained long-term growth, we anticipate that our continued strong free cash fl ow generation will enable the company to return similar amounts of capital to shareholders through buybacks in 2013. THE WORLD’S #1 NONFICTION MEDIA COMPANY DISCOVERY COMMUNICATIONS DEADLIEST CATCH FAST N’ LOUD MOONSHINERS 2012 ANNUAL REPORT Continued Strong Operating Performance & Results Discovery’s fi nancial results in 2012 once again demonstrated the company’s sustained ability to deliver consistent revenue and adjusted OIBDA growth, while continuing to invest in networks and operations worldwide. On a reported basis for the full year, Discovery’s revenue increased 8% to $4.487 billion, primarily driven by 13% growth at International Networks and 5% growth at U.S. networks. Full-year adjusted OIBDA grew 9% to $2.095 billion, driven by an 8% increase at U.S. networks and a 12% increase at International Networks. Content Investment Driving Audience Growth Turning to our operating divisions, the company’s laser-focused strategy of investing in high-quality content for its global brands and networks, combined with the universal appeal of Discovery’s nonfi ction genres, resulted in larger audiences this past year around the globe. This increased market share enabled the company to deliver consistently healthy advertising growth, while also further leveraging its valuable programming across emerging distribution platforms worldwide. At U.S. networks, high-performing new and returning series across the portfolio resulted in primetime viewership growth GOLD RUSH of 8% year-over-year in 2012, which built on 3% growth in 2011 and 7% growth in 2010. Full year advertising revenue at U.S. networks increased 9%, on top of 15% organic growth in 2011. Additionally, U.S. distribution revenue grew 4% in 2012 on top of a 12% increase in 2011, which was driven by expanded digital license agreements. During the year, the company also renewed several affi liate deals with existing operators that secured higher rates across the portfolio, as well as additional distribution for a number of Discovery’s emerging networks. The fl agship Discovery Channel benefi tted from a number of new and returning series in 2012, which have positioned the network with the strongest slate of series in its history. This success was broad based with returning hits such as Gold Rush and Moonshiners growing versus last season, while new series such as Fast N’ Loud, Jungle Gold and Amish Mafi a emerged as breakout hits. In fact, Amish Mafi a delivered the highest-rated premiere in Discovery Channel’s history, building on the huge audience generated with American Chopper Live. Several of these series also helped Discovery Channel deliver its best fourth quarter ever with viewership up 14% versus a year ago, and the network is off to a great start in 2013, with viewership on the channel up over 20% in January. It was the best month in Discovery Channel’s history and, with more returning hits than ever before and a great slate of new series and specials, the network is extremely well positioned to take additional share in the year ahead. DISCOVERY COMMUNICATIONS BREAKING AMISH SAY YES TO THE DRESS LONG ISLAND MEDIUM WHAT NOT TO WEAR 2012 ANNUAL REPORT Discovery’s female fl agship brand, TLC, also delivered big audiences in 2012 with a number of new and returning hits, including Here Comes Honey Boo Boo, which captured the pop culture zeitgeist with its star becoming a household name. TLC fi nished the year with fourth quarter viewership up 13% led by returning favorites Long Island Medium and Sister Wives, both of which built their audiences from last season, and by new hit, Breaking Amish, which was TLC’s highest-rated new series ever. For 2013, TLC has 30 series returning to its schedule and, with a robust development pipeline, we expect to further build its audience and strengthen this global brand, which is now the most widely distributed female-targeted lifestyle and entertainment brand in pay-TV, reaching nearly 300 million households in over 150 markets outside of the U.S. CAKE BOSS HERE COMES HONEY BOO BOO DISCOVERY COMMUNICATIONS DEADLY AFFAIRS WIVES WITH KNIVES 2012 ANNUAL REPORT Once again in 2012, viewership gains in the U.S. were led by Investigation Discovery (ID), which recorded its best year ever and has now delivered 45 consecutive months of year-over-year primetime gains among its key demographic – the longest streak among any advertiser-supported cable network. ID also has the longest length of tune in all of television in both primetime and total day, and fi nished 2012 up over 20% in all of its key demographics. This momentum at ID is poised to continue in 2013 with a great development slate, 35 returning series, increased distribution and viewership, and most importantly, still-discounted CPMs relative to its audience and reach. DEADLY AFFAIRS ON THE CASE WITH PAULA ZAHN THE JUSTICE FILES DISCOVERY COMMUNICATIONS CHASING CLASSIC CARS PITBULLS & PAROLEES CALL OF THE WILDMAN RIVER MONSTERS 2012 ANNUAL REPORT Animal Planet had its best year ever in 2012 with viewership up 17% versus 2011, led by the success of River Monsters, Finding Bigfoot, Call of the Wildman and Tanked, all of which grew versus a season ago. Overall, Animal Planet was one of the fastest growing networks in all of cable in 2012 in terms of viewership and, with 15% more returning hours in 2013, we expect Animal Planet to continue growing its audience in the year ahead. Led by series favorites An Idiot Abroad and Through the Wormhole with Morgan Freeman and special event Firefl y 10th Anniversary Special: Browncoats Unite, Science Channel also marked its most-watched year in network history in 2012. This success was further bolstered by our newest brands with Velocity delivering signifi cant double-digit growth for the year and Destination America up 30% versus 2011. Driven by the success of signature series like Untold Stories of the ER, Shocking Family Secrets and Secretly Pregnant, Discovery Fit & Health also recorded gains among households and female viewers in 2012, and Military Channel earned its best year ever and has now recorded 12 consecutive quarters of year-over-year growth. The success of these emerging networks provides a great launching pad heading into 2013, especially when coupled with the signifi cant momentum we currently have at our fl agships, Discovery and TLC. TANKED METEORITE MEN DISCOVERY COMMUNICATIONS OPRAH’S NEXT CHAPTER WELCOME TO SWEETIE PIE’S 2012 ANNUAL REPORT Continued Momentum at Joint Ventures Discovery also is enjoying meaningful momentum at its U.S. joint venture networks, with strengthened content pipelines driving viewership throughout last year. The Hub is now available in 72 million homes up from 56 million at launch. The network built its audience every quarter in 2012, including 14% gains in the fourth quarter among kids 2 to 11 in both total day and primetime, making The Hub the fastest-growing kids’ network on cable in 2012. With a great slate of both new and returning series set to debut, The Hub is poised to further build its audience in 2013. At OWN: Oprah Winfrey Network, Oprah and her team continue to connect with more viewers each and every month.