Time Warner 2Q16 Earnings Call Notes

Time Warner (TWX) Jeffrey L. Bewkes on Q2 2016 Results

Investing in Hulu

“This morning, we announced another exciting next step in that strategy, and that’s our investment in Hulu. This investment fits our strategy like a glove. It will increase our company’s exposure to the secular growth in over-the-top services, and it will give Hulu more resources to offer consumers more shows and more choices, fostering competition and innovation amongst both SVOD services and among MVPD services. We also announced that the virtual MVPD service Hulu expects to launch early next year will include live and on-demand access to the full suite of Turner networks. Consumers clearly want innovative interfaces. They want more robust on-demand capabilities, and they expect a greater variety of content packages. And we want to support services that do just that.”

CNN is the most watched news network

“Demand in the upfront was particularly strong for CNN, which has undergone nothing short of a renaissance over the past few years. To date, 2016 is the most-watched year in CNN’s history and as the US presidential election draws closer, CNN continues to gain momentum and take share from its peers. CNN was the number one news – let me say this very clearly, CNN was the number one news network among adults 18 to 49 in prime time for the third consecutive quarter, and CNN Digital becomes the number one news service in multi-platform and mobile uniques.”

Kevin Tsujihara – Chairman & Chief Executive Officer, Warner Bros. Entertainment, Inc.

CW is a unique asset

The CW is the unique asset, because you don’t – not only do you not get material retrans, but we also don’t own any. Time Warner doesn’t own, but CBS owns some but predominantly don’t own the station group that it’s being played on. And therefore it has slightly different economics than the other broadcast networks. But what we did was actually give The CW more stacking rights by giving it exclusivity in the year. It has a lot more flexibility in its ability to be able to convey a full season or any number between a full season and five episodes. So it can do, it has a lot more flexibility than it had in the prior deal when The CW had a Hulu in-season deal and a Netflix out of season deal.

SVOD is a better platform for more controversial subjects

“Hi, Rich. It’s Kevin. As it relates to the Chuck Lorre show that we announced going to Netflix, that was really a matter of the subject matter really lent itself to SVOD. Being related to marijuana usage and a marijuana kind of background, it really didn’t really lend itself to advertiser-friendly broadcast networks.”

John K. Martin – Chairman & Chief Executive Officer, Turner Broadcasting System, Inc.

Thinking of virtual MVPDs a the same as traditional partners

Thanks, Rich. It’s John. I’ll start. Listen, I think philosophically the way we’re looking at the potential new entrants, the virtual MVPDs, the Slings, whatever you want to call them, is we’re looking at them in the exact same way as we’re looking at our traditional facilities-based partners. And we have a highly concentrated portfolio of very valuable networks that we intend to get full value for over time, and one of the reasons why we’ve been able to garner significant pricing increases is we’ve been starting from a lower base. But you should assume that the deals that we’re striking with respect to everyone carries with it similar rate card assumptions and accelerants.

Excited about eSports

“With regard to eSports, which we just concluded the championship of the tournament, we couldn’t be more pleased and excited about how we hosted the first-ever eSports tournament on television. We call it ELEAGUE, and across the 10-week tournament between Twitch and TBS, there was almost approaching 1 billion minutes of consumption. It’s brought millions of new viewers to the network. The age of the viewers of TBS are right down the strike zone of what we were hoping for: young viewers, heavily skewing male. We just announced an agreement with a new game, Overwatch. We’re going to host that tournament beginning in the fall, and we’ve announced the second tournament with Counter-Strike, which will air after that. So we love the fact that we own this league in connection with WME and IMG. We think it’s a huge area of secular growth. We absolutely intend to participate in a big way in this area, and we couldn’t be more pleased with how the first season proceeded.”