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View Annual Report 2010 ANNUAL REPORT 2010 ANNUAL REPORT DISCOVERY COMMUNICATIONS 2010 ANNUAL REPORT DISCOVERY COMMUNICATIONS 2010 ANNUAL REPORT DISCOVERY COMMUNICATIONS 2010 ANNUAL REPORT The World Is Our Studio DISCOVERY COMMUNICATIONS United States Canada Latin America UK / Europe Discovery Channel Discovery Channel Discovery Channel Discovery Channel TLC TLC Animal Planet TLC Animal Planet Animal Planet Discovery Science Animal Planet OWN: Oprah Winfrey Network OWN: Oprah Winfrey Network Discovery Kids Discovery Science Investigation Discovery Home & Health Home & Health Investigation Discovery Science Channel Military Channel Liv DMAX The Hub Discovery Civilization Travel & Living Home & Health Military Channel Discovery HD Discovery Civilization Travel & Living Planet Green Turbo Real Time Discovery Fit & Health Discovery HD Discovery History HD Theater TLC HD Shed 3net Quest Discovery en Español Discovery World Discovery Familia Turbo Discovery Historia Discovery HD Animal Planet HD 2010 ANNUAL REPORT 140 worldwide networks 42 languages 180 countries & territories 1.5 billion cumulative subscribers The world’s #1 nonfi ction media company Africa Middle East Asia Australia Discovery Channel Discovery Channel Discovery Channel Discovery Channel Animal Planet Animal Planet TLC TLC Discovery Science Discovery Science Animal Planet Animal Planet Investigation Discovery Investigation Discovery Discovery Science Discovery Science Travel & Living Travel & Living Home & Health Home & Health Discovery World Discovery World Turbo Turbo Discovery HD Discovery HD Discovery HD Discovery HD DISCOVERY COMMUNICATIONS The world’s #1 nonfi ction media company 2010 ANNUAL REPORT DEAR SHAREHOLDERS, Discovery Communications marked its Overall, the domestic audience growth 25th anniversary in 2010 and we are proud this past year at our flagship networks, to report the company had another strong combined with the rapid expansion year. We leveraged a deep and broad slate of our emerging networks, resulted in of quality content across our worldwide primetime delivery growth across our US distribution platforms and continued to networks of 7% among our core adult 25-54 focus on our founding mission of satisfying demographic, while the rest of cable, as well viewers’ innate curiosity. as broadcast, were down slightly. Throughout the year, Discovery delivered In addition, we executed on the launches consistent and diverse growth, with both of three joint ventures, The Hub and OWN: domestic and international networks Oprah Winfrey Network, with our partners delivering advertising and distribution at Hasbro Inc. and Harpo Inc., respectively. increases, while demonstrating real And, in February 2011, we debuted 3net, our operating leverage. The result was 9% top 3D joint venture with Sony Corporation and line revenue growth, double-digit adjusted IMAX Corporation. No other media company OIBDA growth, and margin expansion to matched Discovery’s accomplishment of 45%. Importantly, we were able to generate launching three new brands in the course of these strong returns while simultaneously a year. positioning the company for future growth Finally, our strong performance and financial by continuing to strategically invest in our position also enabled us to begin returning content and brands around the globe. capital to shareholders with the repurchase The company continued to see strong of over $600 million in stock. results from our largest revenue engines, Specifically, the accomplishments in 2010 the Discovery Channel and TLC, and our that position us to continue delivering extensive International business, which sustained growth and shareholder value in includes 140 networks in over 180 countries 2011 included: around the world. Throughout the year, we also made significant progress in further developing our next generation of growth assets with ratings and advertising gains at our emerging US networks, including Animal Planet, Investigation Discovery and the Science Channel. DISCOVERY COMMUNICATIONS Our US fl agship Discovery Channel delivered viewership growth in primetime in 2010 among its key 25-54 demographic. Perennial hits SHARK WEEK, DEADLIEST CATCH, STORM CHASERS and SWAMP LOGGERS all delivered their best seasons ever. Discovery Channel also saw strong performance in 2010 from existing franchises MAN VS. WILD, MYTHBUSTERS and DIRTY JOBS, and sophomore hits DUAL SURVIVAL and MAN, WOMAN, WILD. In addition, Discovery Channel built a significant pipeline of new series that began premiering toward the end of the year, and will continue to debut throughout 2011. Early successes that are attracting large audiences include AUCTION KINGS and GOLD RUSH: ALASKA. In fact, GOLD RUSH: ALASKA was the highest rated new series on Discovery since DEADLIEST CATCH and was the #1 show on all of television on Friday nights for men in January and February 2011. This success, along with other strong premieres, including FLYING WILD ALASKA and SONS OF GUNS, made January 2011 the second best January ever for Discovery in primetime among men with viewership up 11%. February growth was even stronger. Going forward, with a robust slate of 25 new series set to debut, we are confident that 2011 will be a strong year for the network. 2010 ANNUAL REPORT TLC, the company’s second US fl agship, recorded numerous wins in 2010. During the year, TLC firmly established itself as a top 10 network in all female demographics with 31 series averaging over one million viewers. Established hits, such as SAY YES TO THE DRESS, CAKE BOSS and POLICE WOMEN, continued to perform well and were leveraged to create multi-program franchises with additional extensions in new categories and cities. With a multitude of returning viewer favorites, such as WHAT NOT TO WEAR, THE LITTLE COUPLE and TODDLERS AND TIARAS, special events such as SARAH PALIN’S ALASKA, and new successes like SISTER WIVES and DC CUPCAKES, TLC created a deep and diverse programming lineup that resonated with the network’s core female demographic. Much like Discovery, with a stable of established hits and a promising slate ahead, TLC is poised to build on its ratings strength and deliver increased advertising revenue in 2011, and will remain a key priority for the company. Also, in 2010, TLC went global. We began the international rollout of TLC that is expected to bring the network to more than 100 million subscribers around the world by the end of 2011. This global rollout of TLC will provide Discovery with a valuable female-targeted international flagship to complement Discovery Channel and further diversify and strengthen the appeal of our portfolio. DISCOVERY COMMUNICATIONS At our emerging networks, Investigation Discovery (ID) continued to build on the rapid growth it has achieved since its launch in 2008. In fact, in 2010, ID was the fastest growing network in all of cable in both viewership and distribution. ID’s viewership was up 64% among adults 25-54 in 2010, and it ranked among the top 30 ad supported networks for women. Capping off this success, ID achieved a major milestone in the first two months of 2011 when it surpassed the 1.0 household delivery mark for the first time with 14 separate shows, including: ON THE CASE WITH PAULA ZAHN; STOLEN VOICES, BURIED SECRETS and NIGHTMARE NEXT DOOR. With distribution expected to reach 80 million homes, and sustained ratings momentum, ID is poised to deliver even stronger viewership and advertising growth in 2011. ID remains a key priority for Discovery. 2010 ANNUAL REPORT Animal Planet and Science Channel were also investment priorities for the company. Driven by investment in new content, Animal Planet saw viewership gains of 7% among adults 25-54 in 2010. Since the more aggressive brand and programming slate was introduced in 2008, the network has steadily become a much broader, more diverse brand, appealing to a wider audience. WHALE WARS and RIVER MONSTERS, the two highest rated series in Animal Planet history, both delivered double-digit ratings growth in 2010, and the network added three more strong series to its slate with FATAL ATTRACTIONS, ANIMAL HOARDERS and PIT BULLS AND PAROLEES. Animal Planet will remain a key investment priority in 2011 and, with more upcoming titles premiering throughout the year, should continue to expand its audience and advertising revenue. Similarly, content investment at Science Channel drove viewership up 22% in 2010. This growth was led by the hit series THROUGH THE WORMHOLE WITH MORGAN FREEMAN. Now in more than 80 countries, Science Channel and the science category overall remain a priority in the year ahead. The channel is poised to continue its growth with strong performing new series like AN IDIOT ABROAD and a full slate of new and returning programming scheduled to premiere throughout 2011. DISCOVERY COMMUNICATIONS 2010 ANNUAL REPORT Discovery’s International Networks continued to grow audience and reach in 2010. With 140 networks in over 180 countries around the world, Discovery has one of the most extensive international footprints in the industry, including many emerging markets across Eastern Europe, Asia and Latin America where pay-TV growth is expanding rapidly. The company’s focus is capitalizing on this growth by investing in new brands and stronger content across our portfolio to deliver a broader and deeper audience proposition. A key part of this initiative in 2010 was the first phase of a global rollout of TLC as an international female- targeted flagship to complement Discovery Channel. By the end of 2011, we expect TLC will reach 100
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