Digital distribution was front and center in Time Warner's earnings conference call and CEO Jeff Bewkes detailed the various opportunities the company sees in making its content available everywhere.
This optimism that digital distribution will drive long-term value came as Bewkes declared that the company is "on track for a very strong year."
The company bumped up its full-year earnings growth expectations to the high 20 percent range, and it expects to grow revenues $1 billion year over year — its best growth in a while.
But Time Warner's shares fellon the news that the company's two percent revenue growth this past quarter — less than Wall Street expected. Adjusted earnings beat analyst expectations, rising 17 percent to 62 cents per share. (Net profit declined on a $295 million charge from buying back debt.)
Turner Broadcasting and HBO's cable networks continue to drive significant growth: revenue at these channels grew 9 percent on 9 percent higher subscription fees and 10 percent higher ad revenue. And when pressed about questions about HBO's future, Bewkes says he expects to be able to continue to increase HBO's rates. (The increase in ad revenue is a positive sign for the other media giants who will report this week, like News Corp, CBS and Disney). Bewkes acknowledged the "ratings challenges" at CNN, but says the company's taking action to turn that around.
What Bewkes really wanted to focus on, is how the company's positioning itself to take advantage of digital opportunities, saying the "opportunities significantly outweigh the risks." His philosophy: digital distribution offers consumers more choice, and more control, and as a result there's more demand than ever for Time Warner's content. So the company is bringing this "content everywhere" strategy to every part of its business, most notably its "TV Everywhere" strategy of allowing subscribers to access cable content online. Bewkes boasted that some version of TV Everywhere is available in 50 million US homes, and "HBO Go" should be widely available within months.
What about cord cutting?
Bewkes did not sound particularly concerned. He said the most important thing is that if you make all these networks available on demand, that's going to strengthen TV viewing, and maintain your subscription base. And if consumers change their approach, Bewkes says they'll adapt if they have to reach consumers in new ways. Bewkes voiced a very fluid attitude — saying that they evaluate everything from Apple rentals to Google TV . When asked whether the studio would benefit from imposing a longer delay before giving its videos to Netflix and Blockbuster, he said they'll consider it, and they'll have the flexibility to make a change when their deal expires next year.
Warner Brothers — the largest Hollywood studio — reported revenues that were flat from the year-ago quarter and lower operating income, due to tough comparisons to last year's 'Harry Potter' film. (The new 'Harry Potter' movie opens in a few weeks — today Fandango reported its already sold out 500 screenings.) Without going into details, Bewkes says the studio is working with the rest of the industry to launch a premium video on demand service, and to build on top of the 'Ultra Violet' platform that allows consumers to access their digital content from any device.
What about all that cash on Time Warner's balance sheet? The company laid out its international growth strategy: 80 percent of its M&A activity has been with International cable networks, and it appears that trajectory will continue.
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