Wall Street’s spooked today after Disney lowered its earnings forecast for cable last night, citing subscriber slippage at ESPN. Fears that cord-cutting might accelerate are weighing on all Big Media stocks — including Time Warner, which is down more than 8% at mid-day, even after reporting better than expected Q2 earnings.
But Time Warner execs today urged investors not to worry.
“We’ve seen some modest [subscriber] declines in the U.S.,” Turner Broadcasting CEO John Martin acknowledged in a conference call with analysts this morning. Still, “we have not seen any acceleration in the declines.” The revenue expectations from affiliate fees are “remarkably on track” going from high-single-digit percentage growth last year to mid-single-digit in 2015 while over the next two years “we expect that to accelerate into the teens.”
He says that Time Warner might benefit as cable and satellite companies develop so-called skinny bundles — service tiers with fewer channels, and lower prices, than the most popular expanded basic tier.
“We at Turner have the type of networks that will be overly represented in those bundles,” Martin says. And the lower priced offerings “might have the ability to stabilize the overall unit trends and even return it to growth.”
Meanwhile Time Warner offered buoyant comments about the new HBO Now streaming service.
“We’re extremely pleased with how it’s been received,” CEO Jeff Bewkes says, and the company is “already investing in additional programming to support the service…..You’ll see additional announcements in the coming months.”
And it isn’t cannibalizing traditional pay TV. “We’ve seen less than 1% of HBO subs leave the bundle to get HBO Now,” HBO chief Richard Plepler says.
Will it need even more original content than HBO already plans to make? “I don’t think there’s a shortage of content on HBO right now,” Bewkes says. It has more originals than any other subscription video on demand services. What’s more, “it’s the only one with current movies, so it has a big content advantage…All it needs is to be on-demand.”