This Large Media Company Is Growing Fast

Discovery Communications (NASDAQ: DISCA  ) is rare in that it is a rather large media company with a tightly-focused content lineup. The company's networks all bear similarities to one another and even complement each other. However, it also means that Discovery is not as diversified as peers Time Warner (NYSE: TWX  ) or Walt Disney  (NYSE: DIS  ) .

However, Discovery management has been aggressively positioning the company for global growth of late. With acquisitions that significantly expand both the company's geographic reach as well as its content offerings, Discovery appears to be a rather aggressive and low-risk long-term media investment.

Source: Company Facebook

Unique content
It is important to mention Discovery's major strength: its unique content. Quite simply, there are no other media companies that offer such a narrowly focused lineup with such broad appeal. The company's namesake network Discovery Channel along with signature networks Animal Planet and TLC offer nonfiction entertainment that viewers would have a hard time finding elsewhere.

Additionally, the broad nature-related themes of the company's popular channels can appeal to all types of viewers, not just specific demographics. As a result, much of Discovery's content can be easily formatted and packaged for international audiences with relatively little effort.

However, when compared to the diverse lineups of larger companies like Disney and Time Warner, Discovery's network lineup seems limited. For instance, Disney's content lineup includes popular television sports suite ESPN, the kid-friendly Disney Channel networks as well as the ABC assortment of channels. When combined with its popular entertainment properties like Lucasfilm, Marvel, and Pixar, Disney quite possibly has the most well-rounded lineup in all of media.

However, Time Warner's content offerings are almost as diverse as Disney's. The company's television networks include CNN, TBS, TNT, Cartoon Network, Turner Classic Movies, and truTV. Additionally, the company owns the popular premium cable-suite combo of HBO and Cinemax as well as Warner Brothers Entertainment, including the popular comic book universe of DC Entertainment.

However, for investors, sometimes less is more. Discovery, with its tightly focused network lineup, is now looking to expand aggressively; this means growth is likely to surge ahead.

Superior growth
The following is a breakdown of Discovery's growth projections for 2014 compared to those of Disney and Time Warner:

Company Revenue Growth 2014 EPS Growth 2014
Discovery 16.6% 24.9%
Disney 6.7% 19.2%
Time Warner -7.8% 4%

*Disney's fiscal year ends in September

As the above data indicates, fiscal 2014 growth projections for Discovery are way ahead of those for both Disney and Time Warner. Discovery's estimated revenue growth is particularly impressive, as the projected rate of 16.6% is more than double that of Disney, the closest competitor.

But what's driving the more robust growth?

In late 2012, Discovery management made two key acquisitions that continue to help strengthen the company's global positioning. One of the purchases was a 20% ownership stake in French sports network Eurosport, which Discovery extended to a controlling 51% interest in early 2014. CEO David Zaslav explained, "This control gives us a leg up on everyone for the platform we can provide, and now we're competitively in the race country-by-county to look at every sports right."

The other deal was the complete acquisition of 12 Nordic television channels from Germany's ProSiebenSat.1 Media. The move gave Discovery control of television networks in Norway, Sweden, Denmark, and Finland.

CEO Zaslav said, "This deal also includes our first significant foray into scripted content and the opportunity to manage a suite of nonfiction and fiction brands that bring different formats, personalities[,] and storytelling techniques to our creative culture."

Both the Eurosport and Nordic media deals represent Discovery's first attempts at the sports and scripted-drama television segments, respectively, and mean the company is now more diverse. However, possibly the largest benefit of the acquisitions is what it means for Discovery's existing networks in international markets. As new viewers are added to Discovery's audience base, the company can begin to market its popular channels more effectively and expand its viewership.

Bottom line
The robust 2014 growth estimates for Discovery compared to peers indicate that the international expansion strategy management is currently employing is expected to be successful. With an already proven popular and unique channel lineup, geographic expansion for Discovery seems like a sure thing. Investors looking for aggressive long-term growth in media have few better alternatives to Discovery.

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