Time Warner execs offered a few newsy tidbits in their quarterly call with analysts this morning: For example, HBO’s working with Lena Dunam on two new projects. Also, Warner Bros is “making good progress” in talks with exhibitors to develop a premium VOD window that would enable home viewers to watch new films.
Time Warner is set up “very well to achieve our goals for the year,” CEO Jeff Bewkes says. He also talked up new streaming initiatives, including a Boomerang one launched last month, with a DC-branded service that “we plan to launch next year.”
But the Street’s main concern is whether the TV ad market — as well as pay TV generally — is still strong headed into the upfront sales season. And Time Warner flashed a yellow light.
Time Warner Beats Q1 Earnings Estimates Helped By 'Kong', But Ad Sales Fall
“Given some uncertainty in the economy, we think that advertisers are holding back a bit and taking a wait-and- see approach,” Turner CEO John Martin says. He notes that some large advertisers are launching fewer products, including technology, auto, and pharmaceutical companies that were “stronger a year ago.”
Even so, “we continue to believe we’re pretty well positioned” with Turner seeing sales at its entertainment networks “improve modestly as compared to what it looked like at the beginning of the second quarter.” And he’s “pretty optimistic about the health of the U.S. ad market for the full year.”
Indeed, he says that the upfront market “will be healthy” with Turner aiming to “take as much share as we can.”
Martin also is optimistic about the new OpenAP initiative with Fox and Viacom that plans to incorporate detailed audience information into ad sales — not just age and gender — by offering verified data and consistent definitions.
In 2020 “if we’re selling half of our advertising based on audiences [as opposed to demos] we’re going to be in good shape,” he says.
Bewkes adds that the change will “allow you to target better, and do things that viewers find more relevant and that could reduce ad loads in addition to making it better for consumers and more valuable for advertisers.”
What about the surprising 2% drop in ad sales in Q1, reported this morning?
The company attributes that to CBS having more interesting NCAA March Madness championship games. The network and Turner share rights to show the matches.
“The revenue follows the ratings points,” CFO Howard Averill says. “Because they had better match ups, more revenue went to CBS and less relatively went to us.” Even so, “it nets out when you get to profit.”
Bewkes says he doesn’t worry that streaming services such as DirecTV Now, Sling TV, YouTube TV or Hulu With Live TV will hurt the traditional pay TV bundle — the industry’s cash cow. “They can definitely attract new subs to the networks and that’s a great opportunity for Turner,” he says.
That isn’t true for everybody, Martin says: “There’s a lot of networks that are in existence today that add no value to consumers, yet get paid affiliate fees. In a perfectly competitive market, those are eventually going to go away.”
But “that will be good for us,” he says. Turner has three of the 10 top-rated networks with what he calls “the most concentrated portfolio of popular networks in the United States. I don’t see any need for further consolidation.”
He’s also “optimistic” about the rebranding at TNT.
“This year you’re going to see a number of really distinctive, unique dramas on TNT that will be a bit of a departure from the type of original programs that were on in the past. We’re going to have a much more distinctive voice — much more even between male-female and they’ll bring in younger audiences….The drama category is very crowded, but we’ve got a great opportunity.”
Meanwhile, HBO is cutting the number of series it’s licensing to Amazon Prime — citing the effort to build its own digital business.
“I don’t think you’re going to see us extend or expand our relationship with our library programming on Amazon, and we have no plans to do that,” HBO chief Richard Plepler says.
As for Warner Bros’ effort to create a premium VOD window, studio CEO Kevin Tsujihara says that “we think it will be beneficial to both” the studio and exhibitors. “We really do believe that by giving consumers more flexibility and more options when the awareness of the film is the highest, earlier, we’ll create a bigger pie.”
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