by Cameron MacPherson
Time Warner Inc.
One Time Warner Center
New York, NY 10019-8016
Time Warner, Inc. is an American media company with properties in the television and film industries, including cable properties under the Turner Broadcasting System, its premium cable property Home Box Office (HBO), and its production unit Warner Brothers Studios. 
Financials and Strategies
Time Warner Inc., a publicly traded company, posted a $29.8 billion revenue for 2013, a 4% increase from 2012.  On July 16, 2014, news broke that Time Warner had rejected an $80 billion buyout offer from 21st Century Fox. The proposal offered $85 a share for a stock that, just before the announced rejection, sat just above $70 a share.  CEO Jeff Bewkes has made a commitment to reach the $85 per share target to encourage stockholders that the company has growth potential. Under Bewkes, the financial strategy of the company has been to minimize expenses to maximize profits. Time Warner Inc. has recently spun off Time Warner Cable and Time Inc. properties, retaining only its Turner cable properties, HBO, and the Warner Brothers Studios. 
Even with a smaller portfolio of properties, the emphasis on streamlined efficiency still dominates Time Warner’s financial strategy. In recent months, there have been layoffs in all three of Time Warner’s divisions. Turner Broadcasting offered a buyout option to 6% of its staffers in August, two months before announcing that the company would cut 1,475 jobs. Time Warner cut seven percent, or 150, of its domestic employees for HBO in late October, one week before cutting 1,000 jobs at Warner Brothers Studios. 
The strategy, to this point, has been successful. The newly enacted efficiencies and bold strategies for expansion of Time Warner’s HBO property have led to a surge in market valuation. On November 30, the price of Time Warner’s stock reached $85.12 per share, 12 cents above the buyout offer from 21st Century Fox in July (before falling slightly below the line the next day). 
According to Time Warner, a major reason for rejecting the buyout offer was the growth potential of HBO. On September 16, ten days after 21st Century Fox CEO Rupert Murdoch withdrew his buyout offer, Time Warner announced plans for a fourth quarter marketing push for HBO across broadcast, cable, and digital platforms.  A week later, HBO partnered with AT&T to offer customers broadband service, HBO GO, and Amazon’s Prime membership for a limited time offer.  The move, similar to Comcast’s “Internet Plus” package, signaled another step towards unbundling HBO from pricey cable subscriptions. Just a month after that, Time Warner made a major announcement that expanded on this departure from cable bundles. Time Warner stated that it planned to offer a standalone streaming platform through its online HBO GO service starting in 2015. The service will be available without a cable subscription to HBO, using broadband as its distribution channel.  While the details about available programming and distribution channels are yet to be released, many analysts predict the over-the-top service will be marketed towards cord-cutters and millenials rather than those with existing HBO subscriptions. 
With the new online streaming service, Time Warner hopes to attract customers to HBO who might otherwise be deterred by cable’s lofty price tag. Additionally, it has positioned itself as a viable competitor to Netflix in the digital arena. HBO has fewer domestic subscribers than Netflix, but far more international subscribers; HBO boasts 130 million global subscribers to Netflix’s 50 million.  In recent months, Time Warner has sought to expand this international presence. HBO struck a deal with Chinese content distributor Tencent Holdings Ltd., granting the Chinese media giant the exclusive rights to distribute HBO’s original programming. Tencent Video, the company’s online streaming site, will air episodes of HBO shows that have become wildly popular in China through piracy sites.  Executives at HBO hope that this move will cut down on piracy, and create a loyal fan base in the world’s most populous country.
HBO is known for its award winning original programming and loyal fan bases, particularly with hits like “Game of Thrones,” and “True Detective.” One such program, the smash crime hit “Boardwalk Empire,” finished its television run after five seasons. The series, which has won 18 Emmys, had a strong showing with 2.3 million viewers tuning in live for the series finale. When coupled with a same-night rerun and HBO GO statistics, total same-day viewers exceeded 6.6 million. 
HBO launched three new shows in its Sunday lineup, including the third and final season of Aaron Sorkin’s “The Newsroom.” The premiere of the truncated season reached a disappointing 1.2 million viewers live, a 40% decrease from the season two premiere. This year, the series does not benefit from the strong lead-ins of “True Blood” and “Boardwalk Empire,” leading to decreases in live ratings. 
It should be noted that live viewership is not as important for HBO due to its lack of advertising. Only about 25 to 30 percent of viewers watch programs live on HBO, as many viewers use the on-demand services or the web-based HBO GO. 
Turner Broadcasting and its CEO John Martin have expressed a commitment to take more “creative risks,” and announced that the company would double its funding for original programming by the end of 2018.  Turner’s TBS and TNT channels have greatly benefited from airing live sporting events. Alongside Disney, Time Warner renewed its rights to air live NBA games through the 2024-2025 season. TNT is granted the rights to broadcast 64 games a year. 
The 2014 American League Championship Series on TBS was the most viewed MLB playoffs on the network since 2010. The 2014 ALCS averaged 4.3 million viewers, despite featuring teams from mid-sized markets.  Because sporting events can draw large numbers of live viewers, Turner is able to charge higher prices for advertising and licensing fees. Thus, investing in live sporting rights will continue to be a major component of Turner’s business strategy.
The mass viewership of sporting events gives Turner additional leverage in negotiations with television distributors. When contract negotiations were stalling between Dish Network and Time Warner in October, Dish Network suddenly blacked out many of Turner’s cable channels, including CNN, TruTV, and Cartoon Network. Dish Chairman Charlie Ergen stated that while blacking out these channels was a “non-issue,” it would be “more painful” to take down the popular Turner channels Dish had left running: TBS and TNT, which both carry major sporting events. 
The future of Time Warner will be heavily scrutinized by corporate analysts. The question remains: can Time Warner create sustained growth, or was it foolish to pass
on the 21st Century Fox buyout offer? Time Warner has made decisions to bring its stock prices up in both the short-term, through corporate restructuring and job layoffs, and the long-term, through strategic HBO expansions and property spinoffs. Only sustained growth, most likely fostered by HBO’s continued expansion and Turner’s programming decisions, will determine the success of Time Warner.
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