March 26, 2019

Dear Stockholders,

You are cordially invited to attend our annual meeting of stockholders at 10:00 a.m. on Wednesday, May 8, 2019 in the Henry Room at the Lotte Palace Hotel at 455 Madison Avenue, New York, New York 10022.

If you hold shares of Series A or Series B common stock or Series A-1 convertible preferred stock, you will be asked to vote on a number of important matters, which are listed in the Notice of Annual Meeting of Stockholders (the “Notice”). The Board of Directors recommends a vote FOR proposals 1 and 2 and AGAINST proposals 3 and 4 in this Notice.

Your vote is very important, regardless of the number of shares you own. Whether or not you plan to attend the Annual Meeting, please vote as soon as possible to make sure that your shares are represented.

Thank you for your continued support and interest in our company, and I look forward to seeing you at the Annual Meeting.

Sincerely,

Robert J. Miron

Chairman of the Board

Discovery, Inc.

DISCOVERY, INC.

a Delaware corporation

8403 Colesville Road

Silver Spring, Maryland 20910

(240) 662-2000

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Discovery Stockholders:

You are cordially invited to attend, and notice is hereby given of, the 2019 Annual Meeting of Stockholders of Discovery, Inc. to be held in the Henry Room at the Lotte Palace Hotel at 455 Madison Avenue, New York, New York 10022 on Wednesday, May 8, 2019 at 10:00 a.m., local time, for the following purposes:

1. To elect six directors, three Class II directors to be voted on by the holders of our Series A common stock and Series B common stock, voting together as a single class, and three preferred stock directors to be voted on by the holders of our Series A-1 convertible preferred stock, voting separately as a class.

2. To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019.

3. To vote on a stockholder proposal regarding simple majority vote, if properly presented.

4. To vote on a stockholder proposal regarding disclosure of diversity and qualifications of Discovery, Inc. directors and director candidates, if properly presented.

The stockholders will also act on any other business that may properly come before the Annual Meeting or adjournments thereof.

The close of business on March 15, 2019 was the record date for determining the holders of shares of our Series A and Series B common stock and Series A-1 convertible preferred stock entitled to notice of and to vote at the Annual Meeting and any adjournment thereof. For a period of at least ten days prior to the Annual Meeting, a complete list of stockholders entitled to vote at the Annual Meeting will be open to the examination of any stockholder during ordinary business hours at our offices located at 8403 Colesville Road, Silver Spring, Maryland.

By Order of the Board of Directors,

Stephanie D. Marks

Corporate Secretary

March 26, 2019

TABLE OF CONTENTS

2019 PROXY STATEMENT

QUESTIONS AND ANSWERS ABOUT

THE 2019 ANNUAL MEETING OF STOCKHOLDERS

Q: Who is soliciting my vote?

A: The Discovery, Inc. Board of Directors is soliciting your vote on proposals being submitted for consideration at our Annual Meeting of Stockholders to be held on May 8, 2019 (the “Annual Meeting”).

Q: What is the Notice of Internet Availability of Proxy Materials?

A: In accordance with the proxy delivery rules of the Securities and Exchange Commission (the “SEC”), we intend to commence distribution on or about March 26, 2019 of a notice (the “Notice of Internet Availability of Proxy Materials”) indicating that this Notice of 2019 Annual Meeting of Stockholders and Proxy Statement, our Annual Report to Stockholders and our Annual Report on Form 10-K will be made available at www.proxyvote.com. This website will also provide holders of our Series A and Series B common stock and Series A-1 convertible preferred stock (“Series A-1 preferred stock”) with instructions on how to vote their shares. The Notice of Internet Availability of Proxy Materials also indicates how to request printed copies of these materials, including, for holders of Series A and Series B common stock and Series A-1 preferred stock, the proxy card or voting instruction card.

Q: What matters will be voted on at the Annual Meeting?

A: The principal business of the meeting will be the following matters:

We will also transact such other business as may properly be presented at the Annual Meeting or at any postponements or adjournments thereof. However, we are not aware of any other matters to be acted upon at the Annual Meeting.

Q: Who is entitled to vote at the Annual Meeting?

A: The close of business on March 15, 2019 was the record date for determining the holders of our Series A and Series B common stock and Series A-1 preferred stock entitled to notice of, and to vote at, the Annual Meeting and any adjournment thereof. The Notice of Internet Availability of Proxy Materials received by the holders of our Series A and Series B common stock and Series A-1 preferred stock will explain how they may vote their shares. Holders of our non-voting Series C common stock and Series C-1 convertible preferred stock (“Series C-1 preferred stock”) may access and receive this proxy statement and related materials but are not entitled to vote at the Annual Meeting or any adjournment thereof.

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Q: How many shares can vote at the Annual Meeting and how many votes does each share have?

A: As of March 15, 2019, we had outstanding 157,768,154 shares of Series A common stock, with each of those shares being entitled to one vote, 6,512,378 shares of Series B common stock, with each of those shares being entitled to ten votes, and 360,535,296 shares of Series C common stock, which are not entitled to vote. We also had outstanding 7,852,582 and four-ninths (4/9ths) shares of Series A-1 preferred stock, with each of those shares being entitled to nine votes on all matters to be voted on at the Annual Meeting other than the election of directors, which is equal to the number of votes the holder of the Series A-1 preferred stock would have been entitled to cast had it converted its shares of Series A-1 preferred stock into shares of Series A common stock on the record date, and 6,017,473.5 shares of Series C-1 preferred stock, which are not entitled to vote.

Q: How many shares must be present or represented at the Annual Meeting to conduct business at the meeting?

A: With respect to Proposal 1, the presence, in person or by properly executed proxy, of the holders of a majority of the total voting power of the outstanding shares of (a) the Series A common stock and Series B common stock, voting together as a single class, entitled to a separate vote on the election of three Class II directors at the Annual Meeting will constitute a quorum for purposes of this class vote and (b) the Series A-1 preferred stock entitled to a separate class vote on three preferred stock directors at the Annual Meeting will constitute a quorum for purposes of this class vote. The presence, in person or by properly executed proxy, of the holders of a majority in voting power of the Series A common stock, Series B common stock and Series A-1 preferred stock, with the preferred stock considered on an as-converted to common stock basis, voting together as a single class, will constitute a quorum for the combined class votes on Proposals 2 through 5.

If a quorum is not present, the meeting will be adjourned until a quorum is obtained. Abstentions and broker non-votes (where a broker or nominee does not exercise discretionary authority to vote on a proposal) will be treated as present for purposes of determining the presence of a quorum.

Q: What vote is required to elect directors?

A: With respect to Proposal 1, three directors are to be elected by the holders of our Series A common stock and Series B common stock, voting together as a single class, and three directors are to be elected by the holder of our Series A-1 preferred stock, voting separately as a class. The Class II directors will be elected if they receive a plurality of the combined voting power of the outstanding shares of Series A common stock and Series B common stock present in person or by proxy and entitled to vote on the election of directors, voting together as single class. The Series A-1 preferred stock directors will be elected if they receive the written consent or the affirmative vote of the holder of a majority of the outstanding shares of the Series A-1 preferred stock.

Q: What vote is required to ratify the appointment of the independent registered public accounting firm?

A: The affirmative vote of a majority of the combined voting power of the outstanding Series A common stock, Series B common stock and Series A-1 preferred stock, voting as a single class, present in person or by proxy and entitled to vote, is required to ratify Proposal 2.

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Q: What vote is required to approve the stockholder proposals?

A: If properly presented at the Annual Meeting, the affirmative vote of a majority of the combined voting power of the outstanding Series A common stock, Series B common stock and Series A-1 preferred stock, voting as a single class, present in person or by proxy and entitled to vote, is required to approve each of the stockholder proposals.

Q: How can I vote my shares at the Annual Meeting?

A: If you are a holder of Series A or Series B common stock or Series A-1 preferred stock as of the record date, telephone and Internet voting is available 24 hours a day through 11:59 p.m. (Eastern Time) on May 7, 2019. If you are located in the United States or Canada and are a stockholder of record as of the record date, you can vote your shares by calling toll-free 1-800-690-6903. Whether you are a stockholder of record or a beneficial owner, you can also vote your shares on the Internet at www.proxyvote.com.

Both the telephone and Internet voting systems have easy-to-follow instructions on how you may vote your shares and allow you to confirm that the system has properly recorded your vote. If you are voting your shares by telephone or Internet, you should have on hand when you call or access the website, as applicable, the Notice of Internet Availability of Proxy Materials, the proxy card or voting instruction card (for those holders who have received, by request, a hard copy of the proxy card or voting instruction card). If you vote by telephone or Internet, you do not need to return your proxy card to us.

If you have received, by request, a hard copy of the proxy card or voting instruction card and wish to submit your proxy by mail, you must complete, sign and date the proxy card or voting instruction card and return it in the envelope provided so that it is received prior to the Annual Meeting.

Properly completed proxies will be voted as you direct. Properly executed proxies that do not contain voting instructions will be voted “FOR” Proposals 1 and 2 and “AGAINST” Proposals 3, 4, and 5.

While we encourage holders of Series A and Series B common stock and Series A-1 preferred stock to vote by proxy, you also have the option of voting your shares of Series A and Series B common stock and Series A-1 preferred stock in person at the Annual Meeting. If your shares of Series A or Series B common stock or Series A-1 preferred stock are registered directly in your name with our transfer agent, you are considered the stockholder of record with respect to such shares of stock and you have the right to attend the Annual Meeting and vote in person, subject to compliance with the procedures described below. If your shares of Series A or Series B common stock or Series A-1 preferred stock are held in a brokerage account or by a bank or other nominee, you are the beneficial owner of such shares. As such, in order to vote in person, you must obtain and present at the time of admission a properly executed proxy from the stockholder of record (i.e., your broker, bank or other nominee) giving you the right to vote the shares of Series A or Series B common stock or Series A-1 preferred stock.

Q: If my Discovery shares are held in “street name” by a broker, bank or other nominee, will the broker, bank or other nominee vote my shares on each of the annual business proposals?

A: If you hold your shares in street name and do not give instructions to your broker, bank or other nominee, the broker, bank or other nominee will be able to vote your shares with respect to “discretionary items” but will not

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be able to vote your shares with respect to “non-discretionary items,” in which case your shares will be treated as “broker non-votes.” “Broker non-votes” are shares that are held in street name by a bank, broker or other nominee that indicates on its proxy that it does not have discretionary authority to vote on a particular matter. The auditor ratification proposal is a “discretionary item,” whereas the election of directors proposal and the stockholder proposals are “non-discretionary items.” Accordingly, if you hold your shares in street name and do not provide voting instructions to your broker, bank or other nominee, your shares may, in the discretion of the broker, bank or other nominee, be voted only on the ratification proposal. If you hold your shares in street name and do not provide voting instructions to your broker, bank or other nominee, your shares will NOT be voted to elect directors or on the matters presented by the stockholder proposals.

Q: May I change or revoke my vote after returning a proxy card or voting by telephone or over the Internet?

A: Yes. Before your proxy is voted at the Annual Meeting, you may change or revoke your vote on the proposals by telephone or over the Internet (if you originally voted by telephone or over the Internet), by voting in person at the Annual Meeting or by delivering a signed proxy revocation or a new signed proxy with a later date to: Discovery, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

Any signed proxy revocation or new signed proxy must be received before the start of the Annual Meeting. Your attendance at the Annual Meeting will not, by itself, revoke your proxy.

If your shares are held in an account by a broker, bank or other nominee whom you previously contacted with voting instructions, you should contact your broker, bank or other nominee to change your vote.

Q: How do I obtain admission to the Annual Meeting?

A: Stockholders of record as of the record date will be admitted to the Annual Meeting with photo identification and proof of stock ownership, such as the Notice of Internet Availability of Proxy Materials. If you hold Discovery stock in street name, you must bring a copy of an account statement reflecting your stock ownership as of the record date. If you plan to attend as the proxy of a stockholder, you must present valid proof of proxy. Cameras, recording devices and other electronic devices are not permitted at the Annual Meeting.

Q: Who will bear the cost of soliciting votes for the Annual Meeting?

A: We will pay the cost of solicitation of proxies, including the preparation, website posting, printing and delivery of the Notice of Internet Availability of Proxy Materials, proxy statement and related materials. We will furnish copies of these materials to banks, brokers, fiduciaries, custodians and other nominees that hold shares on behalf of beneficial owners so that they may forward the materials to beneficial owners.

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CORPORATE GOVERNANCE

The corporate governance practices of Discovery, Inc. (“us,” “we,” the “Company” or “Discovery”) are established and monitored by our Board of Directors (the “Board”). The Board regularly assesses Discovery’s governance policies in light of legal requirements and governance best practices.

Corporate Governance Guidelines

Discovery’s corporate governance practices are embodied in a formal document that has been approved by our Board of Directors. These corporate governance guidelines (the “Guidelines”) are posted on our website at https://corporate.discovery.com. These Guidelines, which provide a framework for the conduct of the Board’s business, provide that:

The Board periodically reviews the Guidelines and most recently updated them in March 2012. Printed copies of our Guidelines are available to any stockholder upon request to the Corporate Secretary, at the address specified below under “ —Stockholder Communication with Directors.”

Director Independence

It is our policy that a majority of the members of our Board be independent. For a director to be deemed independent, a director must be independent as determined under Rule 5605(a)(2) of the Nasdaq Marketplace Rules and, in the Board’s judgment, the director must not have a relationship with Discovery that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Nasdaq Marketplace Rules require that, subject to specified exceptions, (i) each member of a listed company’s audit, compensation and nominating and governance committees be independent, (ii) audit committee members also satisfy independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and (iii) compensation committee members also satisfy independence criteria set forth in Rule 5605(d)(2)(A) of the Nasdaq Marketplace Rules. The Board considered the relationships and affiliations, as set forth in their biographies below, to determine the directors’ independence. In addition, the Board further considered the directors’ relationships and positions with our large distributors, including Charter Communications, Inc. (“Charter”), Liberty Global plc (“Liberty Global”) and Liberty Broadband Corporation (“Liberty Broadband”). The Board has determined that these relationships do not interfere with the directors’ independence. Discovery’s Board has determined that S. Decker Anstrom, Robert R. Beck, Robert R. Bennett, Paul A. Gould, Kenneth W. Lowe, John C. Malone, Robert J. Miron, Steven A. Miron, Daniel E. Sanchez, Susan M. Swain and J. David Wargo are independent directors.

In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the Board, or any other board committee: (1) accept any consulting, advisory, or other compensatory fee from the listed company,

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other than for board service; or (2) be an affiliated person of the listed company. Discovery’s Board has determined that S. Decker Anstrom, Susan M. Swain and J. David Wargo are independent for purposes of Rule 10A-3.

In order to be considered independent for purposes of Rule 5605(d)(2)(A), a member of a compensation committee of a listed company may not, other than in his or her capacity as a member of the compensation committee, the Board or any other board committee: (1) accept any consulting, advisory, or other compensatory fee from the listed company, other than for board service; or (2) be an affiliated person of the listed company. Discovery’s Board has determined that Robert R. Beck, Paul A. Gould, Kenneth W. Lowe and Robert J. Miron are independent for purposes of Rule 5605(d)(2)(A).

Board Leadership Structure

Discovery historically has separated the roles of Chief Executive Officer (“CEO”) and Chairman of the Board in recognition of the differences between the two roles. The CEO is responsible for setting Discovery’s strategic direction, providing leadership and driving the performance of the Company, while the Chairman of the Board provides guidance to the CEO, sets the agenda for Board meetings and presides over meetings of the full Board. In light of the industry experience and management expertise of Robert J. Miron, our Chairman, and the dynamic leadership of David M. Zaslav, our CEO, the Board feels that this structure continues to be appropriate for Discovery.

Code of Ethics

We have a Code of Ethics (the “Code”) that is applicable to all of our directors, officers and employees. The Board approved the original Code in September 2008 and we adopted a revised Code on January 11, 2019. The Code is available, and any amendments or waivers that would be required to be disclosed are posted, on our website at https://corporate.discovery.com. Printed copies of the Code are also available without charge upon request to the Corporate Secretary at the address specified below, under “ —Stockholder Communication with Directors.”

Committees of the Board of Directors

Audit Committee

The Board has established an Audit Committee, whose members are Messrs. Wargo (Chair) and Anstrom and Ms. Swain. The Board has determined that J. David Wargo is an “Audit Committee Financial Expert” as defined under SEC rules. Pursuant to the Audit Committee Charter, the Audit Committee reviews and monitors the corporate accounting and financial reporting and the internal and external audits of Discovery. The committee’s functions include, among other things:

Factors considered by the Audit Committee in determining whether to retain the firm include:

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The Board has adopted a written charter for the Audit Committee, which is available on our website at https://corporate.discovery.com.

Compensation Committee

The Board has established a Compensation Committee, whose members are Messrs. R. Miron (Chair), Beck, Gould, and Lowe. The committee’s functions include, among other things:

The Compensation Committee reviews all forms of compensation provided to our executive officers and has approved the same.

The Board has adopted a written charter for the Compensation Committee, which is available on Discovery’s website at https://corporate.discovery.com.

The processes and procedures followed by our Compensation Committee in considering and determining executive compensation, including the use of consultants and other outside advisors, are described below in “Compensation Discussion and Analysis.”

Compensation Committee Interlocks and Insider Participation

No member of Discovery’s Compensation Committee is a current or former officer or, during 2018 was an employee, of Discovery or any of its subsidiaries. None of Discovery’s executive officers serves or, during 2018, served as a director or member of the compensation committee (or other committee serving an equivalent function) of any other entity whose executive officers served as one of our directors or a member of the Compensation Committee.

Nominating and Corporate Governance Committee

The Board of Directors has established a Nominating and Corporate Governance Committee, whose members are Messrs. Gould (Chair), S. Miron and Wargo and Ms. Swain. In considering whether to recommend any candidate for inclusion in the Board’s slate of recommended director nominees, including candidates recommended by stockholders, the Nominating and Corporate Governance Committee applies the criteria set forth in our Guidelines. These criteria include the candidate’s integrity, business acumen, experience, commitment, diligence, conflicts of interest, diversity of background and the ability to act in the interests of all stockholders. Our Guidelines specify that the backgrounds and qualifications of the directors considered as a

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group should provide a significant breadth of experience, knowledge and abilities that will assist the Board in fulfilling its responsibilities. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria, and no particular criterion is necessarily applicable to all prospective nominees. The Nominating and Corporate Governance Committee does not have a formal policy with respect to diversity; however, the Board and the Nominating and Corporate Governance Committee believe that it is essential that the Board members represent diverse viewpoints.

The Nominating and Corporate Governance Committee’s primary functions are:

The Board has adopted a written charter for the Nominating and Corporate Governance Committee, which is available on Discovery’s website at http://corporate.discovery.com.

Finance Committee

The Board has established a Finance Committee, whose members are Messrs. Bennett (Chair), S. Miron, Sanchez and Wargo. The committee’s authority and responsibilities include, among other things:

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Executive Committee

The Board has established an Executive Committee, whose members are Messrs. R. Miron (Chair), Bennett, Malone and Zaslav. The primary function of the Executive Committee is to exercise powers of the Board on matters of an urgent nature that arise between regularly scheduled Board meetings, subject to certain limitations. For example, the Executive Committee may not exercise the Board’s powers to approve matters that must be submitted to the stockholders for their approval, appoint directors or officers, amend our Certificate of Incorporation or Bylaws or approve offerings of our capital stock.

Other Committees

The Board, by resolution, may from time to time establish certain other committees of the Board, consisting of one or more of the directors of Discovery. Any committee so established will have the powers delegated to it by resolution of the Board, subject to applicable law.

Board Role in Risk Oversight

The Board has an active role, as a whole and at the committee level, in overseeing management of Discovery’s risks. The Board routinely reviews information regarding our credit, liquidity and operations, as well as the risks associated with each. The Board regularly reviews information regarding our cybersecurity risks and is frequently updated by our Chief Information Security Officer on how we are determining and mitigating those risks. The Audit Committee receives quarterly updates on our cybersecurity risks and readiness. The Audit Committee also oversees management of financial reporting risks. The Compensation Committee is responsible for overseeing the management of risks relating to our incentive compensation plans and arrangements. The Nominating and Corporate Governance Committee manages risks associated with the independence of the Board and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee reports and management presentations to the full Board about such risks.

Board Meetings

During 2018, there were nine meetings of the Board of Directors as whole, sixteen meetings of the Compensation Committee, nine meetings of the Audit Committee, two meetings of the Nominating and Corporate Governance Committee, ten meetings of the Finance Committee and one meeting of the Executive Committee.

Director Attendance at Board and Annual Meetings

In 2018, each director of Discovery attended at least 75% of the aggregate number of Board and committee meetings on which he or she served. The Board encourages all members of the Board to attend each annual meeting of the Company’s stockholders. All twelve of our directors attended the May 2018 annual meeting in person.

Director Nomination Process

Under its charter, the Nominating and Corporate Governance Committee is responsible for recommending to the Board the slate of nominees to be proposed for election by the Series A and Series B common stockholders

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and the slate of nominees to be proposed for election by the Series A-1 preferred stockholders at our annual meeting and for reviewing proposals for nominations from stockholders that are submitted in accordance with the procedures summarized below.

The Nominating and Corporate Governance Committee has the authority to employ a variety of methods for identifying and evaluating potential Board nominees. Candidates for vacancies on the Board may come to the attention of the committee through several different means, including recommendations from Board members, senior management, professional search firms, stockholder nominations and other sources.

The Nominating and Corporate Governance Committee considers all nominations submitted by stockholders that meet the eligibility requirements outlined in our Bylaws. As required by our Bylaws, stockholder nominations of candidates for election as directors must be submitted in writing to the Corporate Secretary, Discovery, Inc., 8403 Colesville Road, Silver Spring, Maryland 20910, no later than the close of business on the 60th day nor earlier than the 90th day prior to the anniversary of the preceding year’s annual meeting. The deadline for stockholder nominations of candidates for election as directors was March 11, 2019. We did not receive any stockholder nominations of candidates for election as directors for the Annual Meeting. For information on what must be included in the written notice to nominate a candidate for election at the next annual meeting of stockholders, see “Stockholder Proposals” below.

In considering whether to recommend any particular candidate for inclusion in the Board’s slate of director nominees, the Nominating and Corporate Governance Committee applies the criteria set forth in our Guidelines. Under these criteria, a candidate:

The Guidelines also provide that directors shall be selected on the basis of talent and experience and that diversity of background, including diversity of gender, race, ethnic or geographic origin, age, and experience in business, government and education and in media, entertainment and other areas relevant to the Company’s activities are factors in the selection process.

The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is a prerequisite for each prospective nominee. In selecting candidates for election to the Board, the Board also considers a director’s independence. These independence standards incorporate the independence standards set forth in the Corporate Governance Rules of the Nasdaq Stock Market. Stockholder nominees for election to the Board will be evaluated by the Nominating and Corporate Governance Committee based on the criteria specified above and using the same process as a nominee recommended by the Board or management.

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Stockholder Communication with Directors

Discovery’s stockholders may send communications to the Board or to individual directors by mail addressed to the Board of Directors or to an individual director c/o Discovery, Inc., 8403 Colesville Road, Silver Spring, Maryland 20910. Communications from stockholders will be forwarded to Discovery’s directors on a timely basis.

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BOARD COMPENSATION

The Compensation Committee reviews compensation for our non-employee directors and recommends any changes to such compensation to the Board for approval. The components of our non-employee director compensation are cash fees and equity awards. The Board believes that appropriate compensation levels help attract and retain superior candidates for Board service and that director compensation should be weighted toward equity-based compensation to enhance alignment with the interests of our stockholders.

We do not have any pension or retirement plans for our non-employee directors. Employee directors do not receive any compensation for their Board service.

The following table shows the cash and equity compensation levels that were in effect in 2018.

Cash Compensation. Cash compensation for non-employee directors consists solely of the annual retainers described above. Annual retainers are paid in quarterly installments. For the purpose of calculating these retainers and fees, the annual period commences with the election of directors at the Annual Meeting. The retainer paid to non-employee directors who are elected or appointed after the most recent annual stockholders’ meeting is prorated based on the quarter in which they join the Board.

Equity Compensation. Non-employee directors receive stock-based compensation under our 2005 Non-Employee Director Incentive Plan, as it may be amended from time to time. The Board determined for 2018 that the equity awards to directors should consist solely of restricted stock units (“RSUs”) of Series A common stock. Annual equity grants are made on the date of the annual stockholders’ meeting. Equity awards for directors who are elected or appointed after the most recent annual stockholders’ meeting are prorated based on when they join the Board. The number of RSUs is calculated by dividing the dollar amount of the award by the closing price of our Series A common stock on the last business day prior to the grant date. The Board has implemented a cap of $750,000 on individual director annual equity award grant date value. RSUs will vest 100% on the one-year anniversary of the grant date assuming continued service to such date. The RSUs granted to our directors do not include the right to receive cash dividends.

Board of Directors Stock Ownership Policy. In January 2013, the Board adopted a director stock ownership policy that requires each director to hold a specified amount of our stock, calculated as a multiple of three times the then-current annual retainer for Board service, exclusive of any additional retainer with respect to committee or other service. Each director is expected to reach the stock holding target within five years from May 15, 2013, the effective date the policy was adopted or five years after joining the Board, for those directors joining after

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May 2013. The Board determined that any shares of our stock beneficially owned by the director, as well as unvested awards of RSUs, but not shares underlying stock options, would be counted for purposes of meeting the stock holding target. Once a director meets the target, the director is expected to maintain holdings at the target for as long as he or she remains a Board member. The Board may take any appropriate action to support the intent of the policy, including requiring a director to retain a percentage of shares pursuant to stock option exercises or vesting events in future years. As of the date of this proxy statement, all directors have reached and maintained the stock holding target or are on track to do so.

Deferred Compensation. Discovery has a deferred compensation program that allows non-employee directors to defer the settlement of their RSU grants until their departure from our Board. If a director elects to defer settlement of his or her RSU grant, they must make an irrevocable election before the end of the year prior to the year in which the grant is made, and must do so for the entire amount of the grant. For example, for the grants made in May 2018, directors made their deferral elections before the end of 2017. Directors do not receive cash dividends on deferred RSUs. Messrs. Anstrom, Beck, Gould, Lowe, R. Miron, Sanchez and Wargo and Ms. Swain elected to defer the settlement of their RSU grants made in 2018.

Expense Reimbursement. Non-employee directors are reimbursed for out-of-pocket costs for attending each meeting of the Board or any Board committee of which they are a member, including airfare, whether by commercial aircraft or private plane.

Director Education. Under the Guidelines, Discovery encourages the participation of all directors in continuing education programs, at Discovery’s expense, that are relevant to the business and affairs of Discovery and the fulfillment of the directors’ responsibilities as members of the Board and its committees.

Charitable Contribution Matching Program. Discovery provides a charitable contribution matching program through which we match contributions made by our non-employee directors to eligible charitable organizations up to a maximum of $20,000 for each director within a given fiscal year. The program is designed to match contributions to educational, arts and cultural institutions that have been approved by the Internal Revenue Service as tax-exempt institutions to which contributions are deductible for federal income tax purposes. Certain types of contributions and institutions would not be eligible for matching, such as tuition payments, contributions made to family foundations or other charitable foundations or organizations that are affiliated with a non-employee director, or membership or alumni association dues. In order to be matched, the contribution must be tax-deductible by Discovery, Inc. Matching contributions under this program are included in the following 2018 Non-Employee Director Summary Compensation Table under the “All Other Compensation” column.

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The following table summarizes the 2018 compensation provided to all persons who served as non-employee directors during 2018.

2018 Non-Employee Director Summary Compensation Table

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PROPOSAL 1: ELECTION OF DIRECTORS

Nominees for Election

Our Board of Directors consists of nine common stock directors, divided among three classes, and three preferred stock directors. Our Class II directors, who are being nominated for reelection at the Annual Meeting for a term that will expire in 2022, are Paul A. Gould, Kenneth W. Lowe and Daniel E. Sanchez. Our Class I directors, who were reelected at the 2018 annual meeting for a term that will expire in 2021, are Robert R. Beck, Susan M. Swain and J. David Wargo. Our Class III directors, who were reelected at the 2017 annual meeting for a term that will expire in 2020, are Robert R. Bennett, John C. Malone and David M. Zaslav. At each annual meeting, the successors of that class of directors whose terms expire at that meeting are elected to hold office for a term expiring at the annual meeting of Discovery stockholders held in the third year following the year of their election. The directors of each class will hold office until their respective death, resignation or removal and until their respective successors are elected and qualified.

Our Board of Directors also includes three preferred stock directors, S. Decker Anstrom, Robert J. Miron and Steven A. Miron, whose terms will expire at the Annual Meeting. Holders of our Series A-1 preferred stock vote on the election of each of the preferred stock directors, but do not vote on the election of any common stock director. At each annual meeting of stockholders, the preferred stock directors are elected to hold office for a term expiring at the following annual meeting of stockholders. The preferred stock directors will hold office until their respective death, resignation or removal and until their respective successors are elected and qualified.

Six director nominees will be voted on at the meeting. The three Class II director nominees will be voted upon and elected by the holders of shares of our Series A common stock and Series B common stock, voting together as a class. The three preferred stock director nominees will be voted upon and elected by the holders of shares of our Series A-1 preferred stock voting separately as a class.

Unless otherwise instructed on the proxy card, the persons named as proxies will vote the shares represented by each properly executed proxy “FOR” the election as directors of the persons named in this proxy statement as nominees. Each of the nominees has consented to serve if elected. However, if any of the persons nominated by the Board of Directors fails to stand for election, or declines to accept election, proxies will be voted by the proxy holders for the election of such other person or persons as the Board of Directors may recommend.

The following tables present information, including age, term of office and business experience, for each person nominated for election as a Discovery director and for those directors whose terms of office will continue after the Annual Meeting. Each member of our Board of Directors and each director nominee possesses skills and experience which makes him or her an important component of the Board as a whole. While consideration of the information presented below regarding each director and director nominee’s specific experience, qualifications, attributes and skills led our Board to the conclusion that he or she should serve as a director, we also believe that all of our directors and director nominees have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to Discovery and our Board.

The Discovery Board of Directors recommends a vote “FOR” the election of the nominated directors.

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Director Nominees for Election by Holders of Shares of Series A Common Stock and Series B Common Stock as Class II Directors with Terms Expiring in 2022

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Director Nominees for Election by Holders of Series A-1 Preferred Stock

Common Stock Directors:

Class I Directors with Terms Expiring in 2021

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Class III Directors with Terms Expiring in 2020

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Except for Steven A. Miron being the son of Robert J. Miron and Daniel E. Sanchez being the nephew of John C. Malone, there is no family relationship among any of Discovery’s executive officers or directors, by blood, marriage or adoption.

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PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

As provided in its charter, the Audit Committee appoints our independent registered public accounting firm, reviews the scope of the annual audit and pre-approves all audit and non-audit services permitted under applicable law to be performed by the independent registered public accounting firm. The Audit Committee has evaluated the performance of PwC and has appointed them as our independent registered public accounting firm for fiscal 2019. You are requested to ratify the Audit Committee’s appointment of PwC. Representatives of PwC are expected to be present at the Annual Meeting and will be given the opportunity to make a statement, if they desire to do so, and to respond to appropriate questions from stockholders present at the meeting. Unless stockholders specify otherwise in their proxy, proxies solicited by the Board will be voted by the proxy holders at the Annual Meeting to ratify the appointment of PwC as our independent registered public accounting firm for fiscal 2019. The affirmative vote of a majority of the combined voting power of the outstanding shares of Series A common stock, Series B common stock and Series A-1 preferred stock present in person or represented by proxy at the meeting or by proxy and entitled to vote at the Annual Meeting on this proposal is required for ratification.

Even if the selection of PwC is ratified, our Audit Committee in its discretion may direct the appointment of a different independent accounting firm at any time during the year if the Audit Committee determines that a change would be in the best interests of Discovery and its stockholders. In the event Discovery stockholders fail to ratify the appointment of PwC, the Audit Committee will take this into consideration regarding the selection of another independent registered public accounting firm.

The Discovery Board of Directors recommends a vote “FOR” the ratification of the appointment of PwC as Discovery’s independent registered public accounting firm for the year ending December 31, 2019.

Description of Fees

Discovery’s Audit Committee has considered whether the provision of services by PwC to Discovery other than auditing is compatible with PwC maintaining its independence and believes that the provision of such other services is compatible with PwC maintaining its independence.

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Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

Discovery’s Audit Committee has adopted a policy regarding the pre-approval of all audit and permissible non-audit services provided by Discovery’s independent registered public accounting firm. Pursuant to this policy, Discovery’s Audit Committee has approved the engagement of Discovery’s independent registered public accounting firm to provide the following services (all of which are collectively referred to as “pre-approved services”):

Notwithstanding the foregoing general pre-approval, any individual project involving the provision of pre-approved services that is expected to result in fees in excess of $50,000 requires the specific pre-approval of Discovery’s Audit Committee. In addition, any engagement of Discovery’s independent registered public accounting firm for services other than the pre-approved services requires the specific approval of Discovery’s Audit Committee. Discovery’s Audit Committee has delegated the authority for the foregoing approvals to the chairman of the Audit Committee, subject to his subsequent disclosure to the entire Audit Committee of the granting of any such approval. All audit and non-audit services provided by PwC in 2018 were approved by the Audit Committee.

Discovery’s pre-approval policy prohibits the engagement of Discovery’s independent registered public accounting firm to provide any services that are subject to the prohibition imposed by Section 201 of the Sarbanes-Oxley Act.

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REPORT OF THE AUDIT COMMITTEE

Each member of the Audit Committee is an independent director as determined by the Board of Directors of Discovery, Inc., based on the rules of the Nasdaq Stock Market and the criteria of director independence adopted by the Board. Each member of the Audit Committee also satisfies the SEC’s independence requirements for members of audit committees.

The Audit Committee reviews Discovery’s financial reporting process on behalf of the Board of Directors. A description of the responsibilities of the Audit Committee is set forth above under the caption “Corporate Governance—Audit Committee.” PwC, Discovery’s registered public accounting firm for 2018, is responsible for expressing opinions on the conformity of Discovery’s audited consolidated financial statements with U.S. generally accepted accounting principles.

The Audit Committee has reviewed and discussed with management and PwC Discovery’s most recent audited consolidated financial statements. The Audit Committee has also discussed with PwC various communications that the Company’s registered public accounting firm is required to provide to the Audit Committee, including matters required to be discussed by the Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 61, as amended (Communications with Audit Committees).

The Audit Committee has received the written disclosures and the letter from PwC required by PCAOB Rule 3526 (Communications with Audit Committees Concerning Independence), and has discussed with PwC their independence.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors of Discovery that the audited financial statements be included in Discovery’s Annual Report on Form 10-K for the year ended December 31, 2018, filed on March 1, 2019 with the SEC.

This report is respectfully submitted by the members of the Audit Committee of the Board.

J. David Wargo, Chair

S. Decker Anstrom

Susan M. Swain

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REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussion, has recommended that the Compensation Discussion and Analysis be included in this proxy statement.

This report is respectfully submitted by the members of the Compensation Committee of the Board.

Robert J. Miron, Chair

Robert R. Beck

Paul A. Gould

Kenneth W. Lowe

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COMPENSATION DISCUSSION AND ANALYSIS

This section analyzes and discusses our compensation programs and provides information about the compensation paid by Discovery to our Named Executive Officers, or “NEOs”:

Highlights

Discovery delivered strong operating and financial results in 2018.

Discovery is a leading global media and entertainment company. We delivered solid financial performance in 2018, reporting increases in revenue, adjusted operating income before depreciation and amortization (“OIBDA”), adjusted earnings per share and free cash flow.

In 2018, we achieved exceptional operating results, including:

In 2018, we established Discovery as a differentiated global content company and built operating momentum to continue the transformation of our business. Our talented executive team, including the NEOs, played a key role in driving these results.

We continue to pay for performance through our executive compensation program design.

We believe that our executive compensation program plays a key role in our operating and financial success. We place great importance on our ability to attract, retain, motivate and reward talented executives who can continue to grow our business and engage audiences around the world.

We use equity-based long-term incentive awards to attract new talent, motivate current executives to enter into or renew fixed-term employment agreements, and reward performance. We also provide meaningful performance-based annual bonus opportunities that align to key operational outcomes and individual performance.

Each of our NEOs received significant long-term incentive awards in 2018 as well as an annual cash bonus. Our short- and long-term incentive compensation programs are structured to:

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In general, we seek to design compensation packages for individual executives based on the scope of the executive’s responsibilities, the executive’s proven performance, and a determination of what is competitive compensation in the market for similar roles, if such data is available. We continue to refine our compensation programs to strengthen the link between executive and stockholder interests.

We use long-term contracts where appropriate to secure the services of senior executives and use our executive compensation programs to support extended contract terms.

We believe that entering into fixed-term employment contracts with our senior executives provides management stability and helps ensure that we can access their services to drive our strategic objectives. When permitted by local law, these agreements also include customary restrictive covenants that protect our business from unfair competition after an executive separates from employment. Each of our NEOs was subject to a fixed-term employment contract during 2018. Each of these agreements includes a number of provisions related to components of compensation during the term of the agreement, as further detailed in “Executive Compensation—Executive Compensation Arrangements,” below. We extended Mr. Campbell’s agreement in February 2018, entered into a new agreement with our CEO, Mr. Zaslav in July 2018, and entered into a new agreement for Mr. Faricy when he was hired in September 2018.

In 2018, we entered into a new agreement with our CEO that will allow us to benefit from his leadership through 2023.

Mr. Zaslav is an outstanding leader who, over the course of his past twelve years as CEO, has built our company into a global media and entertainment company that serves passionate audiences of superfans around the world, reaching viewers in 220 countries and territories in nearly 50 languages. He has driven strong financial performance in challenging times, led the transformative acquisition and integration of Scripps Networks, and expanded our direct to consumer and authenticated streaming services and partnerships to position Discovery to compete as a global differentiated content company.

Mr. Zaslav has paved the way for Discovery’s growth. Under his leadership, our market capitalization has risen from $5 billion to $21 billion through growth and acquisition, our award-winning content has continued to draw growing audiences around the world, and we have become a platform innovator, reaching viewers on all screens, including TV Everywhere products such as the GO portfolio of apps; direct to consumer streaming services such as Eurosport Player and Motor Trend OnDemand; GolfTV, created in partnership with the PGA Tour; and digital-first and social content from our strategic investment in Group Nine Media.

In July 2018, Discovery’s Board of Directors and Mr. Zaslav reached a new agreement to secure him as the leader of the Company through the end of 2023 (the “Zaslav 2018 Employment Agreement”). The contract followed Mr. Zaslav’s leadership of the acquisition of Scripps Networks and positioned him to lead the transformation of our combined business. The contract is structured around performance-based long-term equity, with the majority of his compensation in the form of stock option grants that require sustained increases in share price through the term of the agreement to provide value. The contract also imposed significant equity holding requirements (absent an intervening change in control or termination of employment), further aligning his interests with those of our stockholders.

Mr. Zaslav’s agreement has a five and one-half year term. The contract stipulates an annual base salary of $3 million for the entire term with no base salary increase (the same base salary that applied under Mr. Zaslav’s prior employment agreement, the “Zaslav 2014 Employment Agreement”). The Zaslav 2018 Employment

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Agreement provides for an annual performance-based bonus opportunity; the target amount for 2018 was $9 million, the same level specified under Mr. Zaslav’s prior agreement, with the target value increasing to $22 million for 2019 and beyond. The payout and amount of the bonus is contingent on achievement of quantitative and qualitative goals set by the Compensation Committee in consultation with the Board each year.

The bulk of Mr. Zaslav’s compensation is tied to Discovery’s stock performance, in the form of equity awards. The agreement provides for a large upfront award of stock options, which was made in July 2018 at the time the agreement was executed. The stock option award is divided into five separate grants with increasing grant prices and staggered vesting, meaning that the awards require sustained and substantial increases in stock price to deliver value. The first award (20% of the options) has a grant price of the closing price at the time the agreement was approved on July 16, 2018, with the remaining awards based on above-fair-market-value grant prices that increase 5% for each grant, ranging from 105% to 121.55% of the July 16, 2018 closing price. The vesting of the stock option awards extends over the term of the agreement, with the final tranches not vesting until December 31, 2023, the end of the employment agreement term.

Mr. Zaslav’s 2018 compensation reflected in the Summary Compensation Table for 2018 reflects the large stock option award described above and in more detail in “Executive Compensation—Executive Compensation Arrangements,” below. This award directly links Mr. Zaslav’s interests to those of our shareholders and rewards substantial and sustained stock price growth. The terms of Mr. Zaslav’s employment agreements are discussed in “Executive Compensation—Executive Compensation Arrangements,” below.

Role of the Compensation Committee

Our Compensation Committee (referred to in this Compensation Discussion and Analysis as the “Committee”) operates pursuant to a written charter, a copy of which is posted on the Investor Relations section of our website, https://corporate.discovery.com. The Committee is responsible for developing, implementing and regularly reviewing adherence to our compensation philosophy. In fulfilling these responsibilities, the Committee:

The Committee regularly consults with the Board regarding compensation decisions for the CEO, including, in 2018, the terms and structure of the Zaslav 2018 Employment Agreement.

Role of the CEO in Compensation Decisions

The CEO plays a significant role in the compensation decisions for the NEOs other than himself. The CEO makes annual recommendations to the Committee regarding base salary, annual cash bonus, and long-term incentive awards for each of his direct reports, including the other NEOs. The CEO also recommends to the Committee proposed terms of new employment agreements and amendments to existing agreements for the other NEOs, working closely with Adria Alpert Romm, our Chief Human Resources and Global Diversity Officer, to develop these recommendations. The CEO’s recommendations are based on:

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The CEO also provides the Committee with proposed goals for himself. The Committee reviews and modifies these goals to ensure that they align with the approved strategies and priorities set by the Board and then discusses the revised goals with the CEO, including the weightings to reinforce which goals have the greatest priorities for the year. The degrees to which the CEO achieves the goals are used, in part, to determine the annual bonus of the CEO. The CEO provides his own assessment of his performance and achievement of goals, but does not otherwise participate in the Committee’s deliberations or decisions regarding his annual compensation.

Relationship with and Role of the Compensation Consultant

The Committee has retained an independent compensation consultant, The Croner Company (“Croner”), to advise it on compensation matters generally and specifically on compensation decisions for our executive officers. Croner is retained directly by, and reports to, the Committee. Croner attended all sixteen Committee meetings held in 2018. Croner assisted the Committee by providing the following services, among others:

Prior to being engaged by the Committee, Croner historically had provided compensation survey data to the Company and performed custom surveys on industry compensation practices. In 2011, the Committee adopted a Compensation Consultant Independence Policy to address the ongoing need for this survey work and to determine the process under which work by Croner for the Company would be permitted. The Committee authorized Croner to provide survey services to management of up to $60,000 per year. Non-survey work, or survey work that exceeds $60,000 in the aggregate in a single year, requires pre-approval by the Committee. In 2018, the only services provided by Croner to management were the pre-authorized survey services. Total fees paid to Croner by Discovery in 2017 (other than fees for Croner’s services to the Committee) were less than $15,000.

The Committee annually reviews its relationship with Croner as an independent compensation consultant to determine if Croner has any conflict of interest in its services to the Committee. In the 2018 review, after

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considering the factors set forth in the applicable securities regulations and stock exchange rules, the Committee concluded that Croner did not have a conflict of interest with respect to the services it provides to the Committee. The Committee’s conclusion was based on the following:

Compensation Philosophy

Discovery’s compensation philosophy is to pay for performance, to encourage excellence and to reward executives who deliver. Our programs are designed to provide above-median total direct compensation when our executives deliver above-median performance, as evaluated against both internally set objectives and the peer group companies. We value fixed-term employment agreements when appropriate, and, in 2018, each of our NEOs was subject to a fixed-term employment agreement, as further described in “Executive Compensation—Executive Compensation Arrangements,” below. The terms of these agreements generally incorporate initial compensation elements, including an initial base salary, annual cash bonus target, and “sign on” or contract renewal equity awards. The Committee approves the terms of employment agreements consistent with our overall compensation philosophy, taking into account appropriate compensation elements to secure the services of our senior executives for multi-year terms.

Discovery’s compensation programs are designed to implement its pay for performance compensation philosophy, as follows:

As part of this design, the Committee is regularly provided with information regarding the program design, bonus targets and equity grant guidelines for our employees throughout the Company. The Committee reviews the results of the annual bonus and equity grant processes to assess whether the Company is implementing our pay for performance philosophy. The Committee determines the group of executives over which it will retain oversight, and includes senior executives in addition to Discovery’s NEOs in those reviews.

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Elements of Compensation

Total direct compensation for each NEO consists of three basic components:

Performance-Based Pay

The Committee seeks to deliver the majority of target total direct compensation for each NEO in performance-based pay, with the balance between the annual cash bonus and long-term incentive awards determined by the Committee as appropriate for each role. More than 50% of the annual total direct compensation for each NEO for 2018 was performance-based, except as described otherwise below.    In 2018, the Committee approved one-time grants of time-based RSUs to Messrs. Campbell and Faricy in connection with extending Mr. Campbell’s employment agreement and entering into a new employment agreement with Mr. Faricy. The Committee determined that these were appropriate given the multi-year nature of these agreements, which are described in “Executive Compensation—Executive Compensation Arrangements,” below. When including these one-time grants in addition to the annual compensation awarded to these two NEOs, less than 50% of their respective total direct compensation for 2018 was performance-based. Excluding these one-time grants in 2018, the majority of target annual compensation for Messrs. Campbell and Faricy under their respective employment agreements is performance-based. These agreements are described in “Executive Compensation—Executive Compensation Arrangements,” below.

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We believe the mix of compensation for our NEOs is competitive with the compensation practices specific to our industry and appropriately balanced to benefit the Company in both the short- and long-term so as not to encourage our NEOs to take undue risks. Annual cash bonus awards are more fully described in “—2018 Compensation Decisions—Annual Cash Bonus Awards,” below, and our long-term incentive compensation programs are more fully described in “—2018 Compensation Decisions—Long-Term Incentive Compensation,” below.

Compensation Decisions Framework

The Committee generally makes decisions in the first 90 days of the calendar year regarding annual adjustments to base salary (“Annual Base Salary Review”), the payout amount for annual cash bonus awards with respect to the immediately preceding year (“Annual Bonus Review”), and annual long-term incentive (“LTI”) awards (“Annual LTI Review”) for our executive officers. This annual process includes a review of the following factors, designed to align the Committee’s compensation actions with our compensation principles and objectives:

These factors are considered as a whole, with no specific weight given to any particular factor or factors.

Additional detail about the factors considered in the Committee’s compensation decisions is below.

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Peer Group Analysis and Comparative Financial Review

The Committee annually reviews data from a group of publicly-traded peer companies to support compensation decisions for the NEOs. The peer companies are chosen to best match our Company’s scope of business in terms of revenues, free cash flow, market capitalization and enterprise value, complexity of operations and global scope, as well as proximity to the sectors of the media and entertainment industry in which we operate. The peer group also represents meaningful competition for us in the executive labor market. The Committee reassesses this list annually and considers the inclusion of new, relevant peers, and the elimination of companies from the peer group that no longer provide a strong basis for comparison (including removing peers that have been acquired or otherwise materially have changed their corporate structure). The Committee used the following peer group for compensation decisions made in December 2017 and 2018 (the “2018 Peer Group”) after concluding that the group provided a good mix of companies with a strong focus on content and international reach:

21st Century Fox, Inc.

Activision Blizzard, Inc.

AMC Networks Inc.

CBS Corporation

Charter Communications, Inc.

Lions Gate Entertainment Corp.

Netflix, Inc.

Scripps Networks Interactive, Inc.

Time Warner Inc.

Viacom Inc.

The Committee considered market data from the 2018 Peer Group in the Annual Base Salary Review and Annual LTI Review, and used this data in determining the compensation terms of the new agreement for Mr. Faricy and the extension for Mr. Campbell.

The Committee also reviewed data from international companies, in an effort to identify relevant market data for Mr. Perrette’s role as leader of our international division. The Committee reviewed a group of media and content companies publicly traded in the United Kingdom (“U.K.”) and determined that a mix of traditional media, broadcasting, and publishing companies would be relevant comparators. The Committee selected WPP Group, Sky PLC, RELX Group, Pearson, ProSiebenSat.1 MediaSE, ITV PLC, Informa, and UBM (the “International Peers”) to serve as a reference point in assessing Mr. Perrette’s compensation and reviewed compensation data for the CEOs of that group, applying a 30% discount to factor in Mr. Perrette’s role as a division president rather than CEO of a standalone entity. The Committee determined that 30% was a reasonable amount to discount the market data given the difference between leading a division and a company as a whole.

In October 2018, the Committee reviewed the peer group to address changes in corporate structure during the year, including the Company’s acquisition of Scripps Networks (historically a member of our peer group) and the pending sale of 21^st Century Fox to The Walt Disney Company (“Disney”). The Committee removed Scripps Networks and 21st Century Fox, and concluded that Disney should be added to the peer group. The Committee considered the global nature of Disney’s operations and its extensive content and programming focus in concluding that it was an appropriate addition to the peer group.

Each year, the Committee reviews comparative TSR and other financial measures for the peer group. In December 2017, the Committee reviewed revenue, Adjusted OIBDA, free cash flow, enterprise value, earnings per share and TSR for the Company (the “Comparative Financial Measures”) as compared to the 2018 Peer Group. The Committee conducted this review in December 2017, in preparation for the 2018 Annual Base Salary Review, Annual Bonus Review, and Annual LTI Review. In this review, the Committee concluded that the Company had performed at or above the median of the relevant peer group for Adjusted OIBDA, Free Cash Flow and Earnings per share but lagged behind its peers in other measures.

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Comparative Financial Measures Reviewed in December 2017

The Committee used this review as a reference in determining that it was appropriate to make equity awards in the 2018 Annual LTI Review.

The Committee reviewed the same Comparative Financial Measures in December 2018 in assessing compensation actions to be made in February 2019, including determining not to make a discretionary downward adjustment of the payout amount for PRSU awards to Messrs. Campbell and Perrette in 2016 that were scheduled to vest in 2019.

Comparative Financial Measures Reviewed in December 2018

Target Pay Positioning

The Committee generally targets executive compensation to be between the median and 75^th percentile of the compensation paid by our peer group companies, identified above under “—Peer Group Analysis.” The Committee uses the applicable peer group benchmark and survey data as a reference rather than as a strict guide for compensation decisions and retains flexibility in setting individual target total direct compensation. The Committee may set compensation at or below median for executives who are new to Discovery, to allow delivery of compensation over time that rewards sustained performance. This was the case with the compensation for Mr. Wiedenfels, who joined Discovery in 2017.

In December 2017 and again in February 2018, the Committee reviewed market data for each NEO (other than Mr. Faricy, who had not yet joined the Company), as compared to our 2018 peer group with respect to 2017 total direct compensation, both at target and actual, spreading the value of any one-time contractual equity award over the term of the applicable contract. In this review, the Committee compared each executive’s compensation

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to that of the corresponding position in the applicable peer group. The Committee undertook the review in setting total direct compensation for 2018, and at that time, the comparison to our peer group was as follows:

Tally Sheets

The Committee regularly reviews tally sheets prepared for each of the NEOs to allow consideration of both current and historical compensation. The tally sheets allow the Committee to review an integrated snapshot of the individual and aggregated elements of each NEO’s compensation.

Tax Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code of 1986 (“Section 162(m)”) was the U.S. federal tax provision that generally limited the tax deductibility of compensation paid to “covered employees” to $1 million. Performance-based compensation paid through calendar year 2017 was not subject to the limits on deductibility of Section 162(m), provided such compensation met specified requirements, including shareholder approval of material terms of compensation. Deductibility of performance-based compensation under Section 162(m) was eliminated by the Tax Cuts and Jobs Act of 2017 effective January 1, 2018, subject to transition rules. In addition, the definition of “covered employees” under Section 162(m) was amended to expand the definition of “covered employees.” As such, effective January 1, 2018 “covered employees” include any person who was the chief executive officer or chief financial officer at any time during the tax year, as well as the next three most highly paid NEOs as of the last day of the taxable year. In addition, any person who was a covered employee as of January 1, 2017 or becomes a covered employee thereafter will remain a covered employee in perpetuity.

As a result, for taxable years beginning after December 31, 2017, all compensation in excess of $1 million paid to each of the executives described above (other than certain grandfathered compensation) will not be deductible by us. The Committee considers tax deductibility in making compensation decisions, to the extent deductibility is reasonably practicable and consistent with our other compensation objectives. These considerations were a factor in determining the general long-term incentive program for our senior executives and the use of PRSU and SAR awards for our senior executives, and the change in law was a factor in the Committee’s determining to make awards of RSUs rather than PRSUs to NEOs other than the CEO in the February 2018 Annual LTI Review. As discussed below, the driving factor in deciding to make awards of RSUs to NEOs other than the CEO in 2018 was the uncertainty of financial metrics based on the impending Scripps Networks transaction, but the Committee did consider the impact of the change in tax law as well. The Committee also considered this legal change in deciding to continue to make RSU awards to senior executives other than the CEO in the February 2019 Annual LTI Review, as further discussed in “Changes to Executive Compensation Programs and Arrangements in 2018,” below.

NEO Responsibilities and Accomplishments

Company performance and/or individual achievements play a strong role in many of the compensation decisions for our NEOs, as further described below. The Committee considered the Company’s operational accomplishments and solid financial performance in 2018, as well as each of the individual NEOs’ responsibilities and 2018 accomplishments in making compensation decisions. We have summarized each NEO’s overall performance and accomplishments below.

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Mr. Zaslav: Mr. Zaslav serves as CEO and reports directly to the Board. In 2018, Mr. Zaslav led extraordinary operating accomplishments, including the successful acquisition and integration of Scripps Networks with significant cost and operating synergies, other strategic acquisitions and partnerships to drive our direct to consumer strategy, and the broadcast of our first Olympic Games across Europe. Mr. Zaslav set the stage for long-term growth to extend and enlarge our audiences, expanding our reach on all screens and to new services and distribution platforms. Mr. Zaslav designed a new global organization and leadership team for the combined company, including the creation of the role of Chief Direct to Consumer Officer and the successful recruitment of Mr. Faricy for that role.

Mr. Wiedenfels: Mr. Wiedenfels is our CFO and reports to our CEO. Mr. Wiedenfels made strong contributions in 2018, driving the planning and implementation of the Scripps Networks integration and transformation of the combined company. Mr. Wiedenfels led the rigorous execution of the integration and transformation efforts, with positive Adjusted OIBDA and Adjusted Free Cash Flow. Mr. Wiedenfels established new data-driven processes to evaluate return on investment in content spending, refined our message to investors, and built key relationships internally and externally.

Mr. Campbell: Mr. Campbell is our Chief Development, Distribution & Legal Officer and reports to our CEO. Mr. Campbell successfully led a number of significant acquisitions and other transactions and partnerships in 2018, including the closing of the Scripps Networks transaction, carriage deals with streaming services Sling and Hulu, the agreement with the PGA Tour to launch the GolfTV streaming service, and the partnership with ProSieben in Germany. Mr. Campbell also led our Domestic Distribution division in 2018, with strong renewals of key affiliate agreements. Mr. Campbell provided outstanding legal support for the Company and leadership of business affairs, production management, and our internal studios.

Mr. Perrette: Mr. Perrette serves as CEO and President of Discovery International and reports to our CEO. Mr. Perrette drove strong performance and long-term value in our international division in 2018, including the successful broadcast of the Olympic Games in PyeongChang across Europe and driving growth in our Eurosport Player streaming service to over one million subscribers. Mr. Perrette drove robust operational management of his division, overdelivering on Adjusted OIBDA, including rapid leveraging of the Scripps Networks content library in international markets. Mr. Perrette also was a key leader in the negotiation of strategic sports rights acquisitions and sublicenses in international markets.

Mr. Faricy: Mr. Faricy joined our Company as CEO, Direct to Consumer, on September 17, 2018, reporting to our CEO. Mr. Faricy delivered strong performance in 2018 in assessing our direct to consumer strategy and creating a cohesive direct to consumer leadership team to support our growth.

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2018 Compensation Decisions

The following chart summarizes the compensation decisions for 2018 with respect to each NEO’s base salary, annual cash bonus and long-term incentive awards. Detailed discussion of the decisions made with respect to each element is contained in the discussion immediately below the chart.

Base Salary

Mr. Zaslav: Under the terms of the Zaslav 2014 Employment Agreement, Mr. Zaslav’s base salary was set at $3 million for 2014 and was to remain the same for the remainder of the six-year term (through 2019). The Zaslav 2018 Employment Agreement maintains Mr. Zaslav’s base salary at $3 million for its term through 2023. The Committee determined that it was appropriate to retain Mr. Zaslav’s base salary at the same level and to focus the compensation elements of the agreement on performance-based pay. These agreements are further described in “Executive Compensation—Executive Compensation Arrangements,” below.

Mr. Wiedenfels: The Committee increased Mr. Wiedenfels’ base salary by 3% to $1,133,000 in the 2018 Annual Base Salary Review. The Committee based this decision on the CEO’s recommendation and Mr. Wiedenfels’ strong performance, with reference to the 2018 Peer Group market data.

Mr. Campbell: The Committee increased Mr. Campbell’s base salary by 13%, to $1,800,000 as specified by the February 2018 extension of his employment agreement. The Committee considered Mr. Campbell’s sustained strong performance, market data from the 2018 Peer Group, internal equity, and the long-term nature of the agreement in determining the appropriate base salary adjustment. This increase was in lieu of any further increase as part of the 2018 Annual Base Salary review. Mr. Campbell’s employment agreement is further described in “Executive Compensation—Executive Compensation Arrangements,” below.

Mr. Perrette: The Committee increased Mr. Perrette’s base salary by 3% to £1,246,558 in the 2018 Annual Base Salary Review. The Committee based this decision on the CEO’s recommendation and Mr. Perrette’s strong performance, with reference to the 2018 Peer Group market data.

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Mr. Faricy: The Committee set Mr. Faricy’s base salary at $1,400,000 in the negotiation of his new hire employment agreement. The Committee considered market data from the 2018 Peer Group and the need to incent Mr. Faricy to leave employment with another company to work for us. The Committee also considered internal equity and the base salary of Mr. Faricy’s peers within Discovery.

Annual Cash Bonus Awards

We made annual cash bonus awards to each of the NEOs with respect to 2018 in the Annual Bonus Review in February 2019. The annual bonus target amount for each NEO other than Mr. Zaslav is set as a percentage of base salary. This percentage generally is set in the negotiation of each executive’s employment agreement and is determined by the Committee based on external market data, internal equity, and, if the executive is leaving other employment to join our Company, an assessment of what level of compensation is needed to encourage the individual to accept our offer of employment. If an executive works only part of the year, the bonus amount generally is subject to proration based the period of employment; the bonus amount for 2018 for Mr. Faricy was prorated based on his service in 2018.

Each of the NEOs other than Messrs. Zaslav and Wiedenfels participated in the ICP in 2018, our annual bonus plan that applies broadly to employees around the world. As discussed below, the determination of the actual cash bonus under the ICP is based on achievement of annual financial targets as applied to the target value. The bonus design rewards individual performance through allocation of a “performance pool,” additional funding that is based on overachievement of the Adjusted Free Cash Flow metric and then allocated to high performing employees, including the NEOs other than Mr. Zaslav. In 2018, we also implemented a “modifier” based on Digital results, which modifies the calculation of the performance against the financial targets by up to 10% (up or down) based on achievement of Digital revenue targets.

The bonus structure for Messrs. Zaslav and Wiedenfels was designed by the Committee to meet specific objectives. As discussed below, the annual bonus for each of the CEO and CFO is based 50% on achievement of financial targets and 50% on qualitative goals. Unlike the ICP design, which is calculated first based on performance against financial measures and then finalized based on an assessment of individual performance, the bonus for these two NEOs is based 50% on qualitative goals determined without reference to the Company’s performance against financial targets. Given the role of each of the CEO and the CFO in setting the annual financial targets used for the ICP, the Committee concluded that it would be appropriate to have a substantial part of their bonus opportunities based on separate qualitative measures. Mr. Wiedenfels is eligible for allocation of the ICP performance pool consistent with the process for other senior executives, including Messrs. Campbell, Perrette and Faricy.

This combination of financial targets and qualitative goals allows the Committee to incentivize and reward appropriate setting of financial targets by the CEO and the CFO; the Committee adopted this design as a result of its ongoing risk assessment of our executive compensation programs.

In recommending the performance pool element of the bonus payouts with respect to 2018, Mr. Zaslav and the Committee particularly considered the efforts of Messrs. Wiedenfels, Campbell and Perrette in planning and leading the integration of Scripps Networks and transformation of our combined company.

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The annual bonus target may be changed in the course of an executive’s employment or in the negotiation of a new or extended employment agreement. The following chart summarizes the 2018 bonus target amount and actual payout for each NEO:

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Annual Cash Bonus Awards for Messrs. Zaslav and Wiedenfels

The annual cash bonuses for Messrs. Zaslav and Wiedenfels are based on achievement of Company financial and individual qualitative goals. The Committee approved goals for each in the second quarter of 2018 (after the closing of the Scripps Networks transaction), with goals based 50% on quantitative financial achievement and 50% on qualitative goals related to individual accomplishments. This bonus design is intended to tie the annual bonus for the CEO and CFO to overall Company performance as well as qualitative measures and to moderate the amount of the incentive based on purely financial measures. The Committee determined this was appropriate given their significant roles in setting the Company’s annual plan based on these financial measures.

The quantitative goals were based on:

The Committee determined that including all three measures was appropriate for the CEO and CFO given the scope of their responsibilities and direct impact on resource allocation decisions.

The Committee annually reviews potential adjustments to performance against these measures. The principle applied in deriving the adjustments is to ensure that the calculation reflects the impact of operational decisions taken by management, excludes the impact of events over which management has little or no influence, and excludes the impact of items that were not considered at the time the targets were set. Adjustments for currency fluctuations are made to ensure that the results are currency-neutral. The Committee groups adjustments into three categories:

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The table below provides the definition of each of the three financial metrics and describes at a high level the 2018 adjustments:

The quantitative goals were weighted to reflect equal emphasis on the three measures. The Committee approved the targets in early 2018. For 2018, the quantitative targets, weighting and results were:

The Committee set the individual qualitative goals for Mr. Zaslav related to areas of strategic priority for the Company, and for Mr. Wiedenfels based on the priorities in his role as CFO. The Committee sets updated goals each year based on the changing priorities of the Company, and there is variation from year to year in both the substance of the annual goals and how they are weighted.

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For 2018, Mr. Zaslav’s qualitative goals, with weighting, were to:

For 2018, Mr. Wiedenfels’ qualitative goals, with weighting, were to:

The weighting was based on the Committee’s determination of the relative priority of each of these goals and reflects the significant emphasis on successful integration of Scripps Networks. The Committee historically has set annual qualitative goals with a significant degree of “stretch” and has evaluated achievement against the goals by requiring a significant degree of over-performance to meet the goal.

In early 2019, the Committee reviewed the achievement of these quantitative and qualitative goals, considering each NEO’s self-assessment and, with respect to Mr. Zaslav, the input of the Board. The Committee determined that the Company achieved 100% of the Net Revenue metric, 116% of the Adjusted Free Cash Flow metric, and 103% of the Further Adjusted OIBDA metric. The metrics were designed to provide 100% achievement only upon 100% performance for each of the three quantitative goals. The threshold for a payout was achievement of more than 80% of the metric (performance at 80% or less would result in no payout based on the scale), and for prorated payout for performance between 80% and 100% of the metrics. Based on the performance against the three metrics, the overall calculation of the payout amount was 100% of the target amount.

With respect to the qualitative goals, the Committee, in consultation with the Board, determined that Mr. Zaslav had achieved his qualitative goals at the 100% level and that Mr. Wiedenfels had achieved his goals at the 96.8% level.

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Based on these assessments, the Committee approved a total bonus payment of $9 million to Mr. Zaslav (100% of the overall target amount, based on achievement of 100% of the quantitative and 100% of the qualitative goals). With respect to Mr. Wiedenfels, the Committee approved a total bonus payment of $1,872,507 (138% of the overall target amount, based on achievement of 100% of the quantitative and 96.8% of the qualitative goals, plus allocation of the performance pool as recommended by the CEO based on Mr. Wiedenfels strong performance in 2018).

Annual Cash Bonus Payments for Messrs. Campbell, Perrette, and Faricy

The 2018 annual cash bonus for the remaining NEOs was based on the terms of the ICP. The ICP specifies various financial metrics depending on an employee’s role and business alignment. The financial metrics that applied to each executive’s bonus are reflected in the chart above.

The aggregate amount payable to an individual under the ICP is calculated by:

The calculation of the amount of the ICP award for each of the participating NEOs was as follows:

(Base salary) X (Target bonus percentage) X (percentage based on achievement of applicable financial metrics) + (allocation of any available performance pool funds based on individual performance)

Each of the NEOs other than the CEO was eligible to receive a portion of his bonus in the form of a performance pool component. The CEO recommended a performance pool award to each of the NEOs based on individual performance.

2018 ICP, Paid in March 2019

In the first quarter of 2018, the Committee established threshold (20% payout), target (100% payout) and maximum (110% payout) amounts for each of the ICP financial metrics, a ceiling beyond which higher payments would only be made relating to such metric at the Committee’s discretion and a scale that determined the amount payable for achievement of results between the minimum and the over-achievement amounts. The Committee also established the financial metric that would determine the funding of the performance pool, based on overachievement of the Adjusted Free Cash Flow metric under the ICP.

The 2018 ICP performance targets for the Company as a whole are set forth in the following table. The metrics were based on a weighting of 50% Revenue and 50% Adjusted Free Cash Flow; this was a change from the 2017 weightings, which were based on 40% Revenue and 60% Adjusted Free Cash Flow. The Committee determined that based on the Company’s focus on driving growth in top line revenue through the expansion of our direct to consumer businesses as well as in our core linear businesses, an increase in weighting on Revenue was appropriate.

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The 2018 ICP performance targets for Discovery Networks International (the metric used for 80% of Mr. Perrette’s 2018 bonus) are set forth in the following table:

The Net Revenue and Adjusted Free Cash Flow measures for the Company-wide metrics are the same measures used with respect to the annual cash bonus for Messrs. Zaslav and Wiedenfels, and were subject to the same adjustments discussed above. The Committee also adjusted the performance against the metrics for Discovery Networks International, based on the same categories and adjustments applied to the Company-wide metrics. In addition to the adjustments discussed above, the Committee adjusted the Discovery Networks International financial performance to remove the impact of certain annual bonus payments made to employees who were not NEOs as part of a broad-based program implemented to recognize employees who contributed to transformation and integration activities in 2018.

In addition to the calculation of the ICP performance targets, the Committee determined whether to allocate performance pool amounts to each NEO other than the CEO. The performance pool is funded as a total amount; all bonus-eligible employees are eligible for an award under the performance pool. For NEOs other than the CEO, the CEO recommends individual awards that are paid as part of the overall annual bonus payout.    For 2018, the CEO’s recommendations were based on individual performance, with particular emphasis on the contributions made in the integration and transformation activities as a result of the Scripps Networks acquisition.

The determination as to whether the 2018 financial performance measures were met was made in the Annual Bonus Review during the first quarter of 2019, following review of the full-year 2018 financial statements. Mr. Zaslav recommended a performance pool award to each of the NEOs other than himself. The Committee reviewed this recommendation, each of the NEOs’ self-assessment of individual performance for 2018, and Mr. Zaslav’s review of each executive’s 2018 performance. The Committee approved bonus payments of $2,422,507 for Mr. Wiedenfels (178% of the target amount), $3,811,762 for Mr. Campbell (144% of the target amount), £2,778,590 for Mr. Perrette (149% of the target amount) and $557,406 for Mr. Faricy (114% of the target amount). The bonus amounts for Messrs. Wiedenfels, Campbell, and Perrette included particular consideration of their contributions in entering into and supporting the integration and transformation activities related to our acquisition of Scripps Networks.

Please refer to the “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” column of the Grants of Plan Based Awards Table for more information regarding the range of 2018 payouts available to these NEOs and the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for the actual amounts paid to them with respect to their 2018 awards.

Long-Term Incentive Compensation

We believe that delivering a substantial portion of an executive’s total direct compensation in equity or equity-type awards helps to align our executives’ interests with those of our stockholders. In 2018, we made long-term equity or equity-type awards to each of the NEOs, which we believe serves to focus their attention on increasing the Company’s value over time.

Annual LTI Review and New Hire/Contract Renewal Awards. The Committee generally considers LTI awards to the NEOs in two categories: annual awards, in the same process used for executive-level employees early each year in the Annual LTI Review, and special awards for newly-hired executives or in conjunction with

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the renewal of an existing fixed-term contract. The Committee made awards to Messrs. Wiedenfels, Campbell, and Perrette as part of the Annual LTI Review. With respect to the remaining NEOs:

Mr. Zaslav’s LTI awards for each year are specified in his employment agreement, although the Committee determines financial metrics for each performance-based award at the time the award is made. Mr. Zaslav was subject to the Zaslav 2014 Employment Agreement for the first half of 2018 (through July 15, 2018), and to the Zaslav 2018 Employment Agreement from July 16, 2018. Mr. Zaslav received awards of cash- and stock-settled SARs in January 2018, and of PRSUs in February 2018, consistent with the terms of the Zaslav 2014 Employment Agreement (described in “Executive Compensation—Executive Compensation Arrangements,” below). In conjunction with the Zaslav 2018 Employment Agreement, the Committee approved a grant of stock options with “laddered” grant prices that range from the closing price on the date of grant to 121.55% of the grant date closing price (described in “Executive Compensation—Executive Compensation Arrangements,” below).

Mr. Faricy was hired in September 2018 and his employment agreement provided for a new hire award of RSUs (described in “Executive Compensation—Executive Compensation Arrangements,” below).

In the Annual LTI Review, as an initial matter, the Committee reviews market data for similar roles in the peer group and determines a target amount for the LTI awards that is expressed as a dollar value. With respect to each NEO other than the CEO, the CEO then reviews the target value approved by the Committee and recommends a dollar value for the award based on each NEO’s individual performance. The Committee approves the overall award value, which is then converted into a number of units, as further described below.

For new hire and contract renewal awards, the Committee follows a similar process, referring to market data, as well as internal equity and the overall compensation terms of the agreement. The Committee determines a target amount expressed as a dollar value, which is then converted into a number of units, as further described below.

For 2018, the awards to Messrs. Wiedenfels, Campbell, and Perrette (the three NEOs who received awards in the Annual LTI Review) were in the form of stock options and RSUs (50% of the target value in stock options with respect to the Company’s Series A common stock, 50% in RSUs with respect to the Company’s Series A common stock (as described under “Executive Compensation—Defined Terms—2013 Incentive Plan,” below)). The approved value is converted into a number of stock options based on the Black-Scholes value of the stock option and PRSUs using the closing price of the Company’s Series A common stock on the Nasdaq Global Select Market. In 2018, the Committee continued the practice of using the Black-Scholes valuation of the stock options as of the last trading day of the month prior to the date of grant and the closing price of the Series A common stock as of the trading day before the date of grant with respect to these calculations. This administrative practice allows more efficient processing of equity grants and, with respect to stock options, the ability of the Committee to review the actual number of units at the time the grant is made.

The new hire award to Mr. Faricy was made in the form of RSUs, pursuant to the terms of his employment agreement. The Committee approved an award of RSUs in October 2018. The terms of Mr. Faricy’s employment agreement (including the new hire equity award) are described in “Executive Compensation—Executive Compensation Arrangements,” below.

Timing of Awards. The Committee’s intent is to approve equity awards annually in February each year, with new hire, promotion, and contract grants made throughout the year in the Committee’s regular meetings. In 2018, the Committee decided to adopt a consistent effective date for annual grants of March 1, with the approval of the grants made in February but with a March 1 effective date. This allows a consistent grant date and vesting schedule for annual awards made to employees and provides for consistent annual grant timing.

For new hire, promotion, and contract grants made at other times throughout the year, the Committee continued the practice of making such grants at regularly-scheduled Committee meetings every two to three

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months. On occasion for administrative convenience, the Committee may make a grant with a future effective date, with the grant price set on the future effective date, as was the case with Mr. Zaslav’s SAR grants, approved in December 2017 with a grant date of January 2, 2018, as required by the Zaslav 2014 Employment Agreement.

Our practice of setting regular equity award grant dates based on scheduled Committee meetings, and adopting a consistent date for the annual grants, is designed to avoid the possibility that the Company could grant stock awards prior to the release of material, non-public information which is likely to result in an increase in its stock price, or to delay the grant of stock awards until after the release of material, non-public information that is likely to result in a decrease in the Company’s stock price.

Stock Plan. The Committee makes LTI awards under the 2013 Incentive Plan, an equity-based long-term incentive plan that was approved by our stockholders in 2013 and reapproved by the stockholders in 2018.

2018 LTI Awards

The following chart summarizes the equity awards made in 2018 to each NEO. Because the SAR and stock option awards for Mr. Zaslav were specified in the applicable employment agreements as a number of units rather than an overall target value, we have included the fair market value as of the date of grant for those awards in the column that specifies the 2018 target amount for the other NEOs. In addition, because the number of units for the SARs was specified in the Zaslav 2014 Employment Agreement, which predated our 2014 Share Dividend, the SAR award for Mr. Zaslav was made in Series A and Series C common stock, to preserve the intrinsic value of the award as contemplated by the agreement. Mr. Zaslav’s employment agreements are further described in “Executive Compensation—Executive Compensation Arrangements,” below.

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LTI Awards to NEOs other than the CEO

Stock Options. The stock option awards have a four-year vesting schedule, become exercisable (while the holder remains employed) in equal tranches of 25% on the first four anniversaries of the date of grant, expire on the seventh anniversary of the date of grant, assuming continued employment, and are otherwise consistent with the terms of the applicable plan and award agreement.

RSUs. The RSU awards have a four-year vesting schedule, vesting in three substantially equal tranches, the first 33% on March 1 after the second anniversary of the date of grant and the remaining 33% and 34% on March 1 following the third and fourth anniversaries, assuming continued employment, and are otherwise consistent with the terms of the applicable plan and award agreement.

The Committee adopted the long-term incentive design for NEOs after reviewing market trends and best practices and concluding that the awards would:

In 2018, the Committee chose to make awards of RSUs to the NEOs other than Mr. Zaslav rather than PRSUs, which had historically been the instrument used, because at the time the awards were made in late February, the acquisition of Scripps Networks had not yet closed and the Committee concluded that it would be difficult to set meaningful three-year performance metrics. The Committee also considered the change to Section 162(m), as discussed in “—Tax Deductibility of Executive Compensation,” above.

Zaslav LTI Awards

In 2018, Mr. Zaslav was subject to the Zaslav 2014 Employment Agreement for the first half of the year, and to the Zaslav 2018 Employment Agreement from July 16, 2018. The Zaslav 2014 Employment Agreement specified awards of SARs and PRSUs to be made in early 2018, which were approved by the Committee as contemplated by the agreement.

The Committee then negotiated a new employment agreement with Mr. Zaslav, which was approved by the Board and entered into effective July 16, 2018. This Zaslav 2018 Employment Agreement included a large upfront grant of stock options with “laddered” grant prices as discussed above and described in “Executive Compensation—Executive Compensation Arrangements,” below.

Awards Under Zaslav 2014 Employment Agreement: The Committee made special awards of PRSUs and stock appreciation rights (“Special SARs”) to Mr. Zaslav as provided by the Zaslav 2014 Employment Agreement. The agreement provided for the following awards in 2018, each of which was made early in the year:

The Special SARs were made in Series A and Series C common stock because the awards were specified as a number of units in Mr. Zaslav’s employment agreement and the Committee adjusted the awards and units to preserve the intrinsic value of the awards contemplated by the employment agreement following the 2014 Share Dividend.

The Committee set the two-year performance metrics based on Net Revenue, Adjusted OIBDA, and Adjusted Free Cash Flow. The Committee recognized the difficulty of setting these metrics prior to the closing of the Scripps Networks acquisition, but set the targets based on information then available to the Committee and as required by the terms of the Zaslav 2014 Employment Agreement.

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Over-performance on the Adjusted OIBDA or Adjusted Free Cash Flow measures may offset under-performance by any of the other two metrics, but over-performance on the Net Revenue metric cannot offset under-performance on the other two metrics. The metrics and weighting for the awards of PRSUs made in 2018 are as follows:

One-half of the PRSUs will be distributed in the year after the end of the performance period, and the remaining one-half will be distributed in two equal parts in the second and third years after the end of the performance period, unless Mr. Zaslav makes a valid election to further defer distribution of the shares.

The Special SARs mature and pay out in four equal tranches, 25% each year, as of the first four anniversaries of the date of grant. The Special SARs are 25% stock-settled and 75% cash-settled. The amount of the payout for the Special SARs, if any, is based on the appreciation in our stock price from the grant date to the applicable anniversary. Both the base price and the exercise price are calculated based on a 20-day average closing price, for the ten trading days preceding and including the date for which valuation is occurring and the ten trading days following the date for which valuation is occurring. These Special SARs are designed to auto-exercise; Mr. Zaslav does not choose the timing of exercise and each tranche exercises automatically on the relevant anniversary grant date. All of the units are exercised by the fourth anniversary of the date of grant.

Awards Under Zaslav 2018 Employment Agreement: On July 16, 2018, the Committee approved an award of stock options in connection with entering into a new agreement with Mr. Zaslav extended his employment through the end of 2023 (5.5 years from the date of the new agreement). The agreement provided for the following awards in 2018, each of which was made as specified:

The design of Mr. Zaslav’s compensation in his employment agreement emphasizes stockholder alignment through tying the vast majority of his compensation to Discovery equity, requiring substantial stock holdings,

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and, with respect to the stock option grant made under the Zaslav 2018 Employment Agreement, requiring substantial and sustained increase in share price for the awards to deliver value.

Payouts under PRSU Awards for Measurement Periods 2015-2017

In February 2018, the Committee reviewed achievement of the performance thresholds for the measurement period that ran from January 1, 2015 through December 31, 2017, with respect to the awards made in February 2015 to Messrs. Zaslav, Campbell and Perrette.

For the 2015 PRSU awards, the performance threshold was set at $3,435 million in Adjusted OIBDA over the three-year performance period. The Committee determined that the Company had met or exceeded the performance thresholds for these awards.

As an initial matter, with respect to the awards made to Messrs. Campbell and Perrette in the 2015 Annual LTI Review, as discussed above, the Committee reviewed the Company’s performance relative to the applicable peer group during the three-year performance and determined that the Company’s performance was strong relative to its peers. Accordingly, the Committee decided not to exercise its discretion to reduce the number of shares payable upon settlement of these awards.

The Committee then reviewed the Company’s performance against the three financial metrics and concluded that the Company had met or exceeded the Net Revenue, Adjusted OIBDA, and Adjusted Free Cash Flow metrics during the performance periods when measured on a currency-neutral basis. The multi-year performance metrics are set based on foreign exchange rates prevailing at the time the metrics are established. In 2017, the Committee determined to measure the results using the same constant foreign exchange rates, so that the comparison would not be influenced by fluctuations in the foreign exchange environment. The Committee concluded that it was appropriate to measure performance without the effect of currency fluctuation as management has little or no control over the impact of foreign exchange rates. This adjustment increased the performance against the metrics by less than 1%.

For the PRSU award made to Mr. Zaslav, 100% of the shares vested; 50% were distributed in 2018, and 50% will be distributed in 2019 based on his continued employment and the other terms and conditions of the award. Based upon the Company’s cumulative performance for each of these periods, the overall payout for the PRSU awards was 100%.

The performance against each of the three metrics was as follows:

The metrics for the 2015 PRSUs were based on the Company’s long-range plans as constructed in the year of grant, with moderation as deemed appropriate by the Committee to address the length of the period being measured. These long-range plans were developed on a constant currency basis, accordingly target amounts may vary.

Retirement Benefits

The U.S.-based NEOs generally participate in the same benefit plans and on the same terms as are offered to other U.S.-based full-time employees. We offer a 401(k) defined contribution plan as well as a non-qualified

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Supplemental Deferred Compensation Plan (the “SRP”) that is available to U.S.-based senior employees, including all of the NEOs other than Mr. Perrette. The eligible NEOs participate in these plans on the same terms and conditions as other eligible employees.

To encourage participation in the 401(k) plan, the Company makes a matching contribution of (i) 100% of the employee’s first 3% of salary contributions to the defined contribution plans and (ii) 50% of the employee’s next 3% of salary contributions, up to a maximum amount of 4.5% of eligible base salary in the form of Company matching contributions, subject to certain limits under applicable tax regulations. The Company does not make matching contributions into the SRP. In addition to base salary deferrals, participants in the SRP are also permitted to defer portions of their annual bonus awards into their SRP accounts. The 401(k) and SRP accounts offer the same investment options, with the amounts actually invested for the 401(k) plan and with earnings measured hypothetically for the SRP.

We believe the SRP is necessary to allow employees who would otherwise be limited by IRS restrictions on the amount of compensation that may be considered in participation in the Company’s 401(k) plan to save a proportionate amount for retirement and support the goals of providing competitive compensation packages to our employees.

Mr. Perrette is employed in the United Kingdom and participates in the Company’s benefit plans and programs as offered to other U.K.-based Company employees. These benefits include a defined contribution pension plan.

For more information about the SRP, please refer to the Non-Qualified Deferred Compensation Table below.

Health, Welfare and Other Personal Benefits

The U.S.-based NEOs are eligible to participate in the health, welfare and fringe benefits generally made available by the Company to its U.S.-based regular full-time employees, such as basic and supplemental life insurance, short and long-term disability, commuter reimbursement, fitness reimbursement and access to legal resources. Mr. Perrette is based in the United Kingdom and is eligible to participate in the health, welfare and fringe benefits generally made available by the Company to its U.K.-based regular full-time employees, such as life insurance benefits, short- and long-term disability, and an employer pension scheme.

In addition, we provide the following perquisites and other personal benefits to our NEOs:

Relocation Expenses and International Assignment Benefits; Related Gross-Up. Consistent with our objective to attract and retain a high-performing executive management team for senior roles in our global business, we place high performing executives on international assignments to fill key roles in the places where we do business. We provide relocation and international assignment benefits consistent with our international long-term assignment policies, including reimbursing relocation costs, offering education and other allowances, providing tax equalization benefits, which are intended to maintain the executive’s out of pocket tax liabilities at the same level they would have been had the executive not been assigned to a foreign jurisdiction and, for some benefits, paying the executive an amount equal to the tax resulting from the reimbursement or allowance (a “gross-up”). Mr. Perrette had served initially in his role as an expatriate but was transferred to local pay and benefits in connection with his new employment agreement in 2016. After his localization in June 2016, Mr. Perrette no longer retains any international assignment-related benefits, other than his continuing eligibility for ongoing tax preparation assistance, and repatriation benefits in the event Mr. Perrette’s employment is terminated without Cause (as defined in his employment agreement) or due to the Company’s decision not to renew the employment agreement at the end of the term. For a description of Mr. Perrette’s employment agreement, see “Executive Compensation—Executive Compensation Arrangements,” below.

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Mr. Faricy is provided with corporate housing for the first 10 months of his employment under the terms of his employment agreement. This cost of the housing is considered taxable income to him and is eligible for gross up. For a description of Mr. Faricy’s employment agreement, see “Executive Compensation—Executive Compensation Arrangements,” below.

Aircraft Usage; Related Gross-Up. We lease a dedicated corporate aircraft and also have an agreement with NetJets Inc. pursuant to which we lease the right to a specified amount of travel each calendar year on NetJets’ aircraft. We allow Mr. Zaslav to use a portion of our allotted travel time on our corporate aircraft, or NetJets aircraft, for personal use.

Under the Zaslav 2014 Employment Agreement, Mr. Zaslav was permitted to use up to 200 hours of flight time each year for personal use; this benefit continued under the Zaslav 2018 Employment Agreement. The first 100 hours are provided to him by the Company; with respect to the second 100 hours, Mr. Zaslav is required to reimburse the Company at a rate of two times fuel cost, under a time sharing agreement entered into simultaneously with the Zaslav 2014 Employment Agreement. For details regarding Mr. Zaslav’s employment agreements, please see “Executive Compensation—Executive Compensation Arrangements—Zaslav Employment Agreements.”

Family members may accompany Mr. Zaslav on authorized business flights on corporate aircraft or NetJets flights at no aggregate incremental cost to the Company. For 2018, we provided a gross-up to Mr. Zaslav to cover taxes for imputed income arising when a family member accompanied him on business travel at the request of the Company (e.g., when Mr. Zaslav’s spouse accompanied him to a business event in which attendance by a spouse is customary and serves our business interests).

Home Office Expenses. We reimburse Mr. Zaslav for limited home office expenses, including Internet access.

Car Allowance. We provide Mr. Zaslav with a monthly car allowance as provided in his employment agreement.

For more information regarding the perquisites provided in 2018 to each NEO, please refer to the “All Other Compensation” column of the Summary Compensation Table.

Executive Stock Ownership Policy

In 2012, the Committee adopted an executive stock ownership policy that applies to the NEOs and certain other senior executives. The policy requires each covered executive to hold a specified amount of our stock, calculated as a multiple of the executive’s base salary, as described in the table below. In 2015, the Committee increased the stock ownership requirement for Mr. Zaslav from five times base salary to six times base salary.

The Committee determined that any shares of our stock beneficially owned by the covered executive, as well as unvested awards of PRSUs and RSUs, but not shares underlying unvested stock options, would be counted for purposes of meeting the stock holding target. Once an executive meets the target, the executive is expected to maintain holdings at the target for as long as he or she remains in a role that is identified as a covered executive under the policy.

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The Committee may consider failure to meet the requirements of the policy in making compensation decisions for a covered executive and may take any other action appropriate to support the intent of the policy, including requiring an executive to retain a percentage of shares pursuant to stock option exercises or vesting events in future years.

In mid-2018, the Committee reviewed the NEOs’ progress toward meeting the executive stock ownership policy as adopted in 2012. Each of the NEOs had already met the stock holding requirement. Mr. Faricy had not joined the Company at the time of the review in 2018 but has met the policy requirement based on the new hire RSU grant he received in October 2018.

Mr. Zaslav was subject to certain stock holding and stock purchase requirements pursuant to the Zaslav 2014 Employment Agreement. These requirements were updated to require Mr. Zaslav to hold a specified number of shares of our stock beginning in 2019 and during each subsequent year of the Zaslav 2018 Employment Agreement, both as described in “Executive Compensation—Executive Compensation Arrangements,” below. For 2019, Mr. Zaslav is required to hold 1,800,000 shares of our stock and he has met that requirement. Mr. Zaslav also is required to retain all shares realized upon exercise of the stock options granted as contemplated by the Zaslav 2018 Employment Agreement, net of shares used to pay the exercise price and taxes on exercise, until he separates from employment.

Clawback Policy

All employees are subject to a “clawback” policy, adopted by the Committee in 2010. Under this policy, in addition to any other remedies available to the Company (but subject to applicable law), if the Board, or the Committee, determines that any employee has engaged in fraud or misconduct that resulted in a financial restatement, the Company may recover, in whole or in part, any bonus or other incentive-based or equity-based compensation, received by the employee from the Company in the 12 months after the filing of the financial statement that was found to be non-compliant. The Committee determined that it was appropriate to adopt the policy to provide a further deterrent to fraudulent activity.

Hedging

Hedging of Company stock is permitted with the prior approval of our General Counsel. However, our Insider Trading Policy prohibits short sales and transactions in puts, calls, or other derivative securities on an exchange or in any other organized market. In 2018, none of our NEOs engaged in any hedging transactions.

Changes to Executive Compensation Programs and Arrangements in 2019

In the 2018 Annual LTI Review, the Committee determined to make RSU rather than PRSU awards to the NEOs other than Mr. Zaslav based on the difficulty of setting financial metrics for a three-year period when the acquisition of Scripps Networks was still pending, as well as consideration of the then-recent change to Section 162(m), as discussed in “—Tax Deductibility of Executive Compensation,” above. At that time, the Committee intended to return to making PRSU awards to NEOs in the 2019 Annual LTI Review. In December 2018, the Committee reviewed the design for equity awards to NEOs and other senior executives. The Committee assessed current market practices in our peer group and broadly in our industry and the ongoing transformation of our business. In February 2019, in preparation for the March 1 annual equity awards, the Committee decided to continue to grant RSU awards to NEOs and other senior executives, consistent with the design used in 2018.

On February 1, 2019, the Company entered into an amendment to Mr. Perrette’s employment agreement. The terms of the amended agreement are summarized in “Executive Compensation—Executive Compensation Arrangements—Perrette Employment Agreement,” below.

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EXECUTIVE COMPENSATION

The following tables set forth compensation information for our Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers (computed in accordance with the SEC’s rules) who were serving as executive officers as of December 31, 2018.

Summary Compensation Table

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In addition to the U.S. benefits described above, under the benefits we provide to executives based in the U.K., we made payments on behalf of Mr. Perrette as follows: £2,614 for U.K. life assurance, £1,930 for disability insurance and £6,345 for the U.K. pension plan.

For more information regarding these benefits, please see “Compensation Discussion and Analysis—Retirement Benefits” and “—Health, Welfare and Other Personal Benefits” above.

Pay Ratio Disclosure

In August 2015, pursuant to a mandate in the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the SEC adopted a rule requiring annual disclosure of the ratio of the annual total compensation of the Company’s median employee to the annual total compensation of its Principal Executive Officer (“PEO”). For 2018, the Company’s PEO was David M. Zaslav, our President and CEO. The purpose of the disclosure is to provide shareholders with a company-specific metric to assist in their evaluation of the Company’s executive compensation practices. As required by Item 402(u) of Regulation S-K, we are providing the following information for 2018:

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Based on the above, the ratio of the annual total compensation of our PEO to the median of the annual total compensation of all employees is 1,511 to 1. Mr. Zaslav was awarded a one-time grant of stock options in 2018 in connection with the Zaslav 2018 Employment Agreement. Without the value of this initial grant, Mr. Zaslav’s annual total compensation would have been $35,509,188. Based on this recalculated total the ratio of the annual total compensation of our PEO to the median of the annual total compensation of all employees would have been 414 to 1.

We identified our median employee by using the annual cash compensation as of December 31, 2017, which consisted of actual base salary, target bonus and target sales commission for all employees as of November 30, 2017. We elected to use the median employee from 2017 in 2018 as well. We believe that our overall employee base composition has remained consistent and our employee compensation philosophy and structure have not changed; therefore it is appropriate to use the same employee. Additionally, because we did not own Scripps Networks. for the entirety of 2018, we are excluding those employees from our employee base for purposes of the pay ratio determination. For purposes of determining the median employee, “employee” is defined as any full-time, part-time or temporary individual employed and paid by the Company or any of its consolidated subsidiaries. This did not include any freelance workers, temporary employees who were employed and paid by a third party or independent contractors. For purposes of this disclosure, in identifying our median employee, we calculated annual foreign exchange rates by averaging the 2017 Bloomberg monthly spot rates as of the second business day prior to each month end for the applicable currencies of regions and countries in which we have employees. These annual foreign exchange rates were applied for employees paid in non-U.S. dollar currencies, as appropriate. After we converted the total cash compensation of our employees, we sorted the employees from lowest to highest (excluding our CEO) and determined our median employee based on annual total cash compensation. After identifying the median employee, we calculated the annual total compensation for such employee using the same methodology we use for our named executive officers as set forth in the 2018 Summary Compensation Table in this proxy statement, and using the exchange rates for 2018.

Given the global profile of our workforce, in which approximately 60% of our employees are located outside of the United States, the factors that influence the level of compensation of our CEO vary significantly from the factors that influence the compensation arrangements of our other employees. For employees in our international offices, we use various pay structures that reflect the compensation practices in those regions, which may differ greatly from that of our U.S. based pay programs. The form and amount of Mr. Zaslav’s annual total compensation is consistent with that stated in his employment agreement, which is influenced by the prevailing compensation practices for CEOs in the United States, as well as the competitive market for senior executive talent in our industry. Another factor that affects the ratio of our median employee’s annual total compensation to our CEO’s annual total compensation is that employees are hired at various times of the year, skewing the data, as we have not annualized the compensation of any employees. Therefore, the amounts used to determine our median employee may not represent the amount of compensation that an employee would have received in a full year. Due to the numerous job functions within our company, the pay structure will differ greatly between departments, experience levels and location, which will have a significant effect on the ratio. We believe that our employees are fairly compensated and appropriately incentivized under our current pay practices.

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Grants of Plan-Based Awards in 2018