In this week’s podcast, Deadline’s executive editor David Lieberman and host David Bloom look at CBS’ new Thursday night football deal with the NFL; Twitter’s complexity issue with newbies, and Disney’s red-hot quarter fueled by Thor and new franchise Frozen. They’ll also take a gander at those newly available HBO financial details and how they stack up against Netflix, even as Time Inc. braces for layoffs after its imminent spinoff; and question whether Microsoft’s new boss will be much different from the old boss, particularly with the company’s first boss as his new technology adviser.
The company didn’t make a direct connection to Netflix — but the comparisons, especially in profitability (see chart below), become irresistible now that Time Warner reports results for HBO, previously lumped with Turner networks. This morning’s numbers scratch the surface; other filings should tell us much more. The company intends to take advantage of HBO’s financial firepower: HBO will increase spending and hours for original series in 2014, CEO Jeff Bewkes told analysts. Much of the spending will boost Cinemax, which he calls “an under-appreciated asset” with more viewers than Starz and about about the same as Showtime. HBO, the channel, accounts for about two-third of the operation’s 45M domestic and 85M overseas subs. Execs also noted that subs are growing at a healthy pace, with domestic up by 2M in 2013. International revenues account for 25% of the unit’s total — a number that’s expected to grow. Bewkes says that Netflix, Amazon and Hulu have had “no discernible effect” on HBO so far.
Here’s how HBO and Netflix compare on the top and bottom lines:
CEO Joe Ripp doesn’t say in his memo to staffers today how many people will be affected by his effort to, as he put it, “right-size the organization” — although the total is expected to be in the hundreds. The job cuts are at least partly designed to make the company more attractive to Wall Street when Time Warner spins off its publishing arm, expected by mid-year. Its success “will depend on how investors view the momentum we are generating at the new Time Inc,” he says. That requires “some substantive and sometimes painful changes to the way we operate and approach our business.” Employees will learn “as early as today” who’s getting the ax. He unveiled plans to restructure the organization, ditching its three brand operating clusters. EVP and longtime Time Inc vet David Geithner – who’s former Treasury Secretary Tim Geithner’s brother, and runs the Style & Entertainment Group — will be out. Former Dow Jones exec Todd Larsen will take charge of the company’s most famous titles including People, Entertainment Weekly, Time, Sports Illustrated and Fortune. Evelyn Webster, currently president of the Lifestyle group, will continue to manage publications including Cooking Light, InStyle, and Real Simple. Ed Kelley, who ran American Express Publishing before Time Inc bought it last year, also is leaving.
It’s a big week for media companies and real estate. Yesterday Comcast announced a plan to build a $1.2B corporate campus in Philadelphia. Now Time Warner says that Related Companies, an entity owned by the Abu Dhabi Investment Authority, and GIC ponied up slightly more for the Time …
Outside of Comcast and Verizon, cable and satellite companies “haven’t moved fast enough or effectively enough” to offer video on demand to their subscribers, the Time Warner CEO told the UBS Global Media and Communications Conference. Distributors have the rights to offer shows on VOD, and audiences want it. “If you think about the success of things like Netflix, the interest YouTube – it’s mostly because you can get your stuff on demand.” It’s “a gigantic opportunity” for pay TV. But “there’s very spotty performance among distributors on how these tremendous VOD rights are conveyed to you.” if distributors don’t move more quickly then the demand “is going to be filled by somebody else” — probably a tech company. That would be “a missed opportunity….It’s not going to serve consumers as well and won’t serve the broadband plant” or programming diversity. He seemed uncertain, though, that someone will soon offer an online pay TV service that would compete directly with cable and satellite — which became a big issue here yesterday when Viacom CEO Philippe Dauman said he believes an over-the-top competitor will launch in 2014. “We’re all open to it,” Bewkes says. “The question for consumers and rights providers is: What service do they provide?” He also wonders whether the Internet infrastructure can handle the additional bandwidth demands for video. “That’s an open question.”
Time Warner startled a lot of people recently when it allowed the No. 1 cable operator to include HBO Go in a new $40 a month broadband service. Wouldn’t some consumers cancel their pay TV service if they found that they can watch the channel’s shows without a subscription to basic cable? But CEO Jeff Bewkes says he isn’t worried. “It’s pretty limited,” he told analysts today in a conference call to discuss Q3 earnings. “It won’t be attractive to most people, but might appeal to a segment.” He wouldn’t discuss terms of the deal, or speculate about how many channels a broadband-only service could offer before programmers would demand that the carrier pick up all of them — basically, replicating the pay TV bundle. “It’s something we don’t have to be concerned about” just yet. “Of all the network groups, we have the highest proportion in the top 40″ with 80% of the company’s cable network revenues coming from TNT, TBS, CNN and Cartoon Network. If a broadband provider tried to develop a best-of-cable package “our networks would be in there.” Meanwhile, Bewkes says that HBO’s having “a great year” with subscription growth.
NEW YORK, NY – November 4, 2013 – Time Warner Inc. Chairman and CEO Jeff Bewkes today announced that Karen Magee has been elevated to Executive Vice President, Chief Human Resources Officer. Ms. Magee will report to Mr. Bewkes and will be responsible for the company’s human resources strategy including global compensation and benefits, global organizational and leadership development, worldwide recruitment and executive search, and diversity.
In announcing Ms. Magee’s promotion Jeff Bewkes said: “Over the last several years Karen has provided results-oriented leadership in human resources, working with our top executives across the business units to better define, measure and achieve success. Karen’s efforts have helped to create a workplace environment that attracts and motivates high-caliber talent, which in turn enables us to develop and distribute great television, film and journalism content that is valued by audiences worldwide.”
Time Warner‘s CEO says he’d be open to helping a broadband-only product from a cable company because it would protect HBO‘s relationship with the biggest source of the premium channel’s customers. “Distributors are competing more,” Jeff Bewkes told investors at the Goldman Sachs Communacopia Conference in NYC. A cable-provided broadband arrangement with HBO “will make it an offer you can’t refuse. … We see growth there for HBO in that.” The exec still doesn’t like the idea of offering the premium channel on broadband to people who don’t also deal with a pay TV provider. As many as 10M homes receive Internet service without cable or satellite, he says. “If you take out old people, it’s probably 5M or 6M.” But people in about 70M homes subscribe to pay TV but not HBO. “We’re working more on that.” Bewkes also provided the most vigorous response I’ve heard so far by a programming exec at the confab to questions about whether their price increases might drive the pay TV business off a cliff by making it too expensive for consumers.
Pay TV distributors who believe that the decks are stacked against them in retransmission negotiations with major content producers should take a look at the 180-page media and entertainment report out today from International Strategy and Investment Group analyst Vijay Jayant. He urges investors to buy shares of AMC Networks, CBS, 21st Century Fox, Time Warner, and Viacom. He’s neutral on Discovery, Disney, and Scripps Networks. The big reason: These eight companies, he says, “control 90% of total TV viewership and 60% of total film production in the U.S., which means that, for the most part, they have the power to determine how content is packaged and priced to distributors and, therefore, consumers.” That muscle will be evident over the next few years as they squeeze cable and satellite companies to pay $60B in carriage fees for their channels in 2016, up from $45B this year. These payments “are drivers for the overall sector.” Factoring in “the consumer’s inherent psychological need for entertainment (even during tough times),” Jayant predicts healthy profits for his eight companies, with annual average returns on invested capital over the next three years ranging from 40.1% for AMC to 9.9% for Time Warner.
Richard Parsons, the former chairman of Citigroup who was chairman/CEO of Time Warner until he stepped down in 2007, has resurfaced in Harlem. He and wife Laura are opening two new uptown restaurants in Minton’s and The Cecil. Minton’s is a restoration of the famed 1930s/1940s Harlem jazz club Minton’s Playhouse. It will reside in the original location, redesigned as a contemporary jazz supper club. Next-door sister restaurant The Cecil will be an Afro-Asian-American brasserie that integrates the culinary traditions of the African Diaspora with traditional Asian and American cuisines. The Parsons have appointed their long-time friend and Cafe Beulah restaurateur Alexander Smalls as Executive Chef of both eateries. The Cecil opens September 23rd and Minton’s opens the following month.
Listen to (and share) episode 46 of our audio podcast Deadline Big Media With David Lieberman. Deadline’s executive editor talks with host David Bloom about a week filled with explanations from media executives regarding the many challenges to their lucrative business models, including whether cord-cutting is accelerating; if Aereo is a threat or a gimmick; whether Dish and DirecTV are facing a shotgun marriage forced by investors; and why Time Inc. is staying at Time Warner for a little longer.
John Martin sure looks like Time Warner CEO Jeff Bewkes’ heir apparent with this move, which will put him in charge of Turner Broadcasting System on January 1. Currently Time Warner’s Chief Financial and Administrative Officer, he’ll replace TBS chief Phil Kent who has run the operation since 2003 and now will become the unit’s chairman “for a transition period,” according to today’s release. Bewkes says that Kent initiated the change. They decided that “now is the right time to announce the next generation of leadership.” There’s no mention, though, about how the change might affect David Levy, who’s TBS’ president of sales, distribution and sports — and was widely seen as Kent’s likely successor. Bewkes says that Martin “is one of the most capable and strategically minded executives I know” adding that he’s also “a broad and thoughtful business thinker whose inclusive management style and focus on driving the business forward will fit well with the Turner tradition.” The company says that it will name Martin’s successor “in the coming weeks.” Although Martin has extensive experience handling financial matters, this will be the first time he’ll run such a large creative enterprise. TBS also is at the center of Time Warner’s growth plans, especially after the company spins off its Time Inc magazines. The Turner networks — which include TBS, TNT, and CNN — are worth about $54.6B, or 60% of Time Warner’s current value with publishing, Sterne Agee analyst Vasilly Karasyov estimated last month.
The entertainment giant’s employees may soon become participants in an ambitious attempt to spiff up a dreary Manhattan neighborhood around a rail yard. Time Warner has a tentative agreement to move its …
No details on the terms yet, but TiVo stock closed +8.3% after the court in Texas where the trial was to begin on June 10 confirmed that the case has been settled. TiVo had alleged …
NEW YORK – June 6, 2013 – Time Warner Inc and China Media Capital, China’s leading investment fund focused on media and entertainment, today announced the formation of a strategic investment partnership. The announcement was made in the western Chinese city of Chengdu, where top business leaders convened for the 2013 Fortune Global Forum. The goal of the partnership is to capitalize on China’s rapidly expanding media sector as digital devices proliferate and China’s demand for high-quality content across multiple platforms rises.
“This partnership with CMC and Ruigang Li will give us a unique window into one of the world’s largest and fastest growing media and entertainment markets,” said Time Warner Chairman and CEO Jeff Bewkes. “Increasing our global presence is one of Time Warner’s strategic priorities and China is one of the most attractive territories in which we operate, but it is complex. This alliance will give all our businesses a savvy and accomplished partner as we strive to bring our leading brands and storytelling to people everywhere, across a wide range of devices.”