There’s little doubt that all broadcasters are seeking higher carriage deals from cable MSOs, but Time Warner’s CFO John Martin spelt out the specific targets at the Morgan Stanley TMT conference in Barcelona last week.
“We fully intend to monetise the meaningful amount of investments that we’ve been making over a series of years in programming at our Cable Networks Group. For the three year period 2014, 2015 and 2016 our intention at our Turner Domestic Broadcasting Networks, which is roughly about $4 billion of affiliate revenue and which are the revenues that we derived from the distributors. We intend to accelerate that revenue growth so that – over that three year period on a compound annual basis it should reach double-digits – which would be a meaningful acceleration as compared to what it has been recently,” said Martin, who effective January 1st will be CEO and running the division and responsible for both the domestic and international aspects of the business.
He explained that 2104 “will be the first year of this acceleration of our affiliate rate cycle so we would expect to see affiliate revenues begin to accelerate at or close to double-digits next year.” He said that the first series of multi-year agreements were now kicking in with four of the US’ largest [content] distributors.
Martin added that T-W would be making investments in HBO “and our international ventures but we see opportunities and we see now it’s a particularly interesting opportunity to press our competitive advantage and make strategic investments to ensure that our businesses are not only continuing to delivery strong results now but that they’ve got a sustainable future”.
Martin, who has been CFO since 2005, had more to say, adding that even though plans were at an early stage, “We’re hopeful and optimistic that our HBO Group, which has about $4 billion of subscription revenues, is going to begin to be able to grow at a faster rate than it has been. So theme one I would say would be affiliate rate monetisation.
Specifically addressing international, he said that Latin America has been a runaway success. “Time Warner with HBO, Turner and Warner together is the number one provider of multi-channel television outside the US in Latin America, so [covering] Brazil, Mexico, Chile, Colombia, Argentina. And there we’re riding the wave of dramatic secular growth in pay television penetration and broadband penetration notwithstanding the fact that there has been explicit growth over the last several years, there is still very low penetration rates relative to most other countries. And so we think that growth has got a multiple year time horizon on it. And because we’ve got attractive scale in Latin America, we’ve been able to enjoy attractive unit growths from our existing networks, launch new networks and benefit from a maturing of the advertising cycle and we think that can continue.”
“In Asia, we think there are still opportunities to launch new networks. HBO just launched the first ever premium channel in India, we’ve launched several new kids channels recently and we’re going to be looking to opportunistically launch new networks there to take advantage of what’s still is not a completely mature market. In Central and Eastern Europe is an area that we have a lot of interest in and it’s been one that’s been economically hit hard, so we’re going to continue to watch that but look when you take it overall as a portfolio of networks and network positions, and it’s get back to the programme and cost question and the margin question. We still believe that our international cable networks that they represent one of the most attractive margin opportunities that we have over the next several years as we take advantage of secular growth and prove our operational efficiency and manage our cost structure to optimise against what the revenue opportunity is.”