Time Warner’s CEO Jeff Bewkes told analysts at Deutsche Bank’s media conference in New York that his company was focusing on four key areas for future growth.
“The first is [that] we’ve made huge investments in content and we’re going to increase our affiliate fees dramatically as a result of that,” said Bewkes. He explained that key investments such as acquiring NCAA (college athletics) rights, and other events such as launching Conan O’Brian’s late-night show, had cost billions of dollars. “Conan’s launch, which has done really well with that demographic, [and] original programming, which has been up and been successful on Turner, 5 of the top 10 hour-shows on cable are on TNT.”
“Go to HBO, [where] 3 of the top 5 hits that have ever been on HBO in its history are on HBO now. And each of them is generating something like 12 million viewers. So the pipeline for shows there is going up. And then if you take HBO Go, which is the best example of Internet VoD and on television, VoD functionality. If you take the strength of the increasing programming on HBO, the strength of the increasing program on Turner, and the fact that Time Warner’s networks, HBO and Turner, are the most vigorous in granting [rights] out there, so we basically have the pole position.”
Bewkes told delegates that distribution fees would increase. “All of the content, plus the VoD functionalities, made the networks stronger. So that drives subscribers, that drives wholesale pricing. And that’s basically the story on how do the network revenues, particularly affiliate revenues, grow. We’ve been very clear that we’re going to increase those more than double digits between 2013 and 2016 at Turner, on the basic side.”
“Second is, we’ve been increasing pretty fast our international network performance. We’re going to increase our international business faster. And just to give you a size of it, leaving Warner product sales out, half of [our] revenues are overseas, we have about $3 billion a year now in 2012 in overseas network revenue between Turner and HBO, driving about $650 million of operating earnings. That’s up double from where it was in ’09. We are on track to do what we have said we were going to do, which is to increase that from $650 million up to $1 billion in roughly 3 years. And that’s not requiring any further international investments.”
“Third, we think there are exciting new ways, and I think we’ve been at the forefront of realising these to monetize our content through new business models, like the On Demand.” Bewkes added that the Warner Bros library was huge. “And where I get excited, and I hope you can get excited about it, we have the largest library of movies, 6,000 movie titles and 75,000 television episodes in our Warner Bros. vaults to sell into, not only an increasing Subscription VoD market in the United States, but the increasing demand overseas for that programming. And none of those numbers count any of the originals at HBO or Turner, which is a dramatically increasing slate.”
“And then fourth, which you’ve seen us do, is cost efficiency. We’ve been increasing our investment in operating and programming costs, keeping our unproductive spending flat, and increased our margins about 500 basis points, you’ve seen that.