By Brian Stelter
New York Times
After several grueling years, Oprah Winfrey’s cable channel OWN has turned the corner toward profitability, her business partners at Discovery Communications said, six months ahead of a previously stated goal.
In the second quarter, OWN was cash-flow positive for the first time, said David M. Zaslav, Discovery’s chief executive. He credited investments in programming, including two new shows from Tyler Perry, and increases in subscriber fees from cable and satellite providers.
OWN, which is a joint venture between Winfrey and Discovery, is now “starting to pay down the investment Discovery has made in the venture,” Zaslav said.
When the channel was announced in mid-2008, Discovery said it would provide the cable shelf space for Winfrey (by converting the Discovery Health Channel into OWN) and $300 million in loans.
Amid the hoopla that accompanied its debut on the first day of 2011, Discovery briefly predicted that the channel would make a profit in its first year. But the ratings soon sagged, resulting in lower-than-expected advertising revenue and no small amount of soul-searching by Winfrey and Zaslav. Discovery repeatedly chipped in more money; its loans now total $510 million.
Throughout 2012, industry analysts described OWN as a flop or an outright failure. Some predicted that Discovery would have to write off some of its investment.
But a series of changes that year, including the layoffs of some staff members and the scrapping of an expensive talk show by Rosie O’Donnell, helped lay the groundwork for a turnaround. Shortly after those steps were taken, Zaslav started predicting that OWN would break even sometime in the second half of 2013.
Zaslav noted that the channel’s breakthrough was “ahead of the originally anticipated second half of the year goal of cash flow break even.”
“I want to congratulate Oprah and the entire team at OWN for this significant milestone,” Zaslav said.
A Discovery spokesman declined to say how much OWN earned in the second quarter, making it difficult to predict how long it might take the venture to repay its loans.
The positive earnings announcement for OWN came amid a somewhat disappointing quarter for Discovery overall. While its earnings — $300 million in the quarter, 82 cents a share — were up 2.4 percent from the period a year earlier, analysts were expecting profit of $328 million and 90 cents a share on average. The company also trimmed its full-year outlook.