Discovery Shutters Stores

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With the announced closing of 103 Discovery Channel Stores behind him, Discovery Communications CEO David Zaslav may turn his housekeeping broom toward the company’s 900-employee international division.

Last week’s announcement of the Discovery retail stores’ closing by third-quarter 2007 will eliminate the jobs of 1,000 full-time and part-time employees, or about 25% of Discovery’s overall worldwide workforce, the company said.

The job eliminations continue Zaslav’s cost-cutting efforts since he took over as Discovery’s CEO in January. Before Zaslav’s arrival, the company employed 4,000 people globally. In February, three top executives were let go as part of a corporate restructuring effort. Then, in April, 200 more jobs were cut in the company’s U.S. networks and Education businesses.

The next Discovery department that will fall under heavy scrutiny is most likely the International division, according to Discovery executives. The division represents more than 100 worldwide networks in 170 countries and territories serving 234 million households in 35 languages. The division employs approximately 900 International employees, based both outside the U.S. and in the company’s Silver Spring offices.

In an earlier interview with Multichannel News, Zaslav said he needed to take a closer look at the international and corporate service groups like human resources before his restructuring plans would be complete.

E-COMMERCE FOCUS

Discovery has run stores in shopping malls since the early 1990s. Executives close to the programmer said the stores generated $130 million annually, but reported yearly operating losses of $30 million.

Instead of relying on the stores to sell its Discovery-branded educational and video products, the company will look to increase sales of its consumer products through partnerships with large retailers like Toys 'R’ Us, where it already markets toy animals, models and other fare. The company will also market through its DiscoveryStore.com e-commerce site, according to Zaslav.

“By eliminating our owned-and-operated, brick-and-mortar storefronts, which are cost-intensive and complicated businesses, Discovery can focus its efforts on high-growth e-commerce and licensing operations,” Zaslav said in a prepared statement.

The strategic review of the commerce business was led by financial-services firm J.P. Morgan. Discovery said it will retain liquidator Gordon Bros. Group to handle the shutdown.

Discovery-branded products such as this month’s DVD release of Planet Earth will mostly be sold through its e-commerce site, which receives 12 million unique visitors each year.

The company will also reach consumers through Web-based partnerships with Amazon.com and eBay. Overall, Discovery’s e-commerce operations posted record growth and sales for 2006 and are up 144% year-to-date over last year, according to the network. But it does not disclose actual revenue or profit numbers for these businesses.

“The company’s e-commerce operations posted record growth and sales for 2006, and to realize the full value of our quality content, Discovery must also sell through large retailers who have more stores and provide more exposure to a greater number of consumers,” said Zaslav.

Discovery will also explore new avenues for product sales via television by capitalizing on the company’s reach both in the United States and globally, the company said.

TRAVEL STAYS PUT

The commerce moves come on the heels of Discovery’s completion of its sale of the Travel Channel to Cox Communications. Discovery Communications last Monday closed the exchange of Cox’s 25% stake in Discovery for Travel Channel and Travel Channel.com parent Travel Media, as well as $1.3 billion in cash.

The companies initially announced the deal March 29.

Despite the deal, Discovery will continue to handle the ad-sales and affiliate relations duties for the 88 million-subscriber network, with Cox handling the marketing and programming, according to Travel Channel president and general manager Pat Younge.

He added that all but one of Travel’s executive staff will remain intact and the network will remain in Discovery’s Silver Spring, Md., offices for up to one year, but will not relocate to Atlanta.

“The psychological advantage is that we become Cox’s No. 1 television network, whereas we were one of 14 or 15 at Discovery,” Younge said. “Cox also has access to a variety of platforms — cable, VOD, mobile and high-speed Internet — so it will help all of us leverage the platforms and the content to their maximum advantage.”

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