Discovery Communications may have lost as much as $330 million from the inception of Oprah Winfrey’s OWN cable channel in 2008 through Dec. 31, 2011, reports Bloomberg Businessweek.
Although OWN is expected to make money in 2013, the costs are so high that Discovery may be forced to write off some of its current $420 million investment, the piece notes.
OWN is the most “successful failure in television today," according to RBC Capital Markets media analyst David Bank.
After reducing its staff by at least 30, down from a high of 150 employees last year, and canceling "The Rosie Show," the network is aiming to save as much as $50 million in 2012, the story notes. A new contract with Comcast will deliver 20 cents per month for each pay-TV subscriber, which should allow OWN to start recording profits in 2013, the piece adds.
The story reports: “Discovery has poured at least $585 million into OWN. It contributed the Discovery Health Channel (OWN took its slots on cable systems), which it valued at $273 million, as its equity stake and loans and interest of $312 million, according to the SEC filing. (OWN’s borrowings from Discovery have tripled since the venture was formed.) The lower $420 million investment value Discovery noted in its yearend filing suggests its share of the OWN loss is $165 million and growing.”
The channel still has time to find its footing, in part because marketers remain attracted to Winfrey, said Horizon Media’s Brad Adgate. “Advertisers still want to be a part of Oprah’s brand,” Adgate said. “It’s not a four-alarm fire yet as far as marketers go.”
But the clock is ticking. The report notes: “When starting a network, media companies typically lure advertisers after building an audience. OWN drew high-profile advertisers such as Procter & Gamble and Kohl’s first. ‘Now they’re trying to build an audience,’ Bank says. ‘Advertisers will only wait so long for that audience to come.’”