Discovery’s Oprah Network to Lose $143 Million, SNL Kagan Says

Oprah Winfrey Network, the cable- television venture between Discovery Communications Inc. (DISCA) and the talk-show host, may lose $142.9 million in 2012 as it struggles to gain viewers, according to researcher SNL Kagan.

The startup network probably lost $107 million on a cash- flow basis in 2011, Derek Baine of SNL Kagan said in a report yesterday. Discovery reported a $35 million loss on equity investments last year, reflecting its OWN stake and other holdings, SNL Kagan said.

The forecast highlights the risks associated with a new cable network. OWN, which canceled Rosie O’Donnell’s show, cut 30 jobs this week and brought in Discovery’s Neal Kirsch as chief financial and operating officer. Through year-end, Silver Spring, Maryland-based Discovery had provided $312 million investment to the channel, according to a Feb. 17 filing.

“There may be a significant write-down at OWN in the first quarter from both programming costs for shows that are not working, as well as severance costs for those being laid off,” SNL Kagan said.

Discovery challenged the findings.

“The report is riddled with inaccuracies and bad information,” David Leavy, a spokesman, said in a statement. “The venture is on more solid ground with more business momentum than ever before. We remain confident in the future of OWN, and the long-term value we are building.”

Results have been below expectations, Discovery said in the annual 10-K filing, and the company is monitoring the performance in case it needs to write down the investment.

Ratings for the network have been “minuscule,” SNL Kagan said. OWN may not obtain expected carriage rates when discussions with cable systems resume at the end of this year, the author wrote.

Discovery gained 1.9 percent to $48.33 yesterday in New York. The Class A shares have advanced 18 percent this year.

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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March 22 (Bloomberg) -- Brad Adgate, director of research at Horizon Media, talks about the outlook for the Oprah Winfrey Network. OWN, which is a cable-television venture between Discovery Communications Inc. and the talk-show host, may lose $142.9 million in 2012 as it struggles to gain viewers, according to researcher SNL Kagan. Adgate speaks with Scarlet Fu and Stephanie Ruhle on Bloomberg Television's "InsideTrack." (Source: Bloomberg)