Time Warner Inc.

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By: Nubia Dandridge, John Rattazzi, Johnny Pierce
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Time Warner [1]

Company

Time Warner Inc (headquartered in New York City) is an international media and entertainment conglomerate. The conglomerate is segmented into three divisions: Turner is the branch of the company consisting of cable networks and digital media. Home Box Office (HBO) is the company’s domestic premium television and streaming service which includes international premium pay. Warner Bros is the segment of the company primarily responsible for the company’s role in entertainment for television, feature length films, video-games and home video production and distribution [1].

Background

Time Warner Inc. was originally founded in 1923, under the name Warner Brother Pictures Inc. Under the direction of Polish immigrant brothers Harry, Albert, Sam, and Jack Warner, Time Warner Inc. has gone from being a nickelodeon in Pennsylvania, to one of the largest media conglomerates in the world by partnering with Home Box Office Inc. and Turner Broadcasting [2].

Television Success

One of Time Warner Inc.’s most valuable assets is HBO. The premium television service is widely recognized today for its show Game Of Thrones, but their fall series premiere of Westworld has taken viewers by storm.  The series premiere telecast drew 3.3 million viewers across multiple platforms by the following morning.  This opening was 1.1 million viewers greater than the first day Game Of Thrones was released back in 2011 [3]. Westworld has been approved for a second season [4] due to increased viewership from streaming services HBO Go and HBO Now, which allows viewers access to HBO programming without a subscription to the traditional HBO television service.  

Film Success

In September 2016 Time Warner acquired the commercial and tv rights to the “Star Wars”  collection, (valued at $250 million) including “Rogue One: A Star Wars Story” and “Star Wars: A Force Awakens.”  The deal makes TBS and TNT the only networks with legal rights over the series. Time Warner made a strategic move during a volatile in which networks are hustling to lock up as much content that already has a formidable audience attached to it. The DC subsidiary of Warner Bros. is sufficiently lucrative for the entire company. In relation to the 10 DC series on air this season, total revenues for the line up have surpassed $1 billion. The CW, the joint television station owned by Warner Bros. and CBS Corp. is home to half of those series. 

Warner Brothers has seen its share of success since September.  With movies such as Suicide Squad earning a total gross of $325.1 million [5] and Fantastic Beasts and Where to Find Them earning a total gross of $158.1 million [6] in just two weeks has earned Warner Brothers a total gross income of roughly $806 million since the beginning of September. 

Company Fallbacks 

Since September, a negative mark against Time Warner Inc’s overall performance  is due to low ratings for Turner Broadcasting. Turner is most known for it’s networks like TNT, TBS, CNN, Adult Swim, HLN, and Cartoon Network. ratings are down 14% across all networks as younger demographics are opting more for streaming services like Netflix and Hulu. As of more recently, quarter three of 2016 came in with numbers 8% lower than they were this time last year [7]. 

The other recent flaw for Time Warner Inc. has been Warner Brothers.  Asides from three recently released movies, every other movie released after August has struggled to even reach its budget.  If Suicide Squad, Fantastic Beasts and Where to Find Them, and Sully, weren’t counted in the total gross, Warner Brothers would not have made enough money domestically to fund the movies.  While this is upsetting for Time Warner Inc. they cannot be too disappointed because this is the best year [8] that Warner Bros has had since 2009 thanks to releases earlier in the year. 

The financial success of the studio does not come without its qualms. In October 2016, Director Rick Famuyiwa walked away from directing The Flash with mention of creative differences between himself and the studio as the reason for his departure [9]. Before Famuyiwa, Seth Grahame-Smith stepped down from his role as director of the same film. Analysts claim that the tension between the creative vision directors are hired to develop and the executive oversight Warner Bros exercises over such projects could impact the studio’s ability to hire directors in the future, not just for their DC projects.

AT&T and Time Warner Inc.

Time Warner’s market value currently hovers at approximately $62 billion with AT&T in position to buy the company for $85.4 billion (as of October 22nd). In September and October 2016, senior executives from both AT&T and Time Warner met informally to discuss business strategies as well as a potential merger [10] of the two conglomerates. Acquiring Time Warner would allow AT&T to control one of the world’s major providers of pay-TV and one of the nation’s largest wireless and home internet providers. AT&T would also stand to inherit an extensive collection of content and programming from HBO to CNN as well as Cartoon Network and NBA basketball programming. If the deal is approved, Jeff Bewkes will resign from his position as CEO of Time Warner Inc after the transitional phase. President Elect, Donald Trump, however has spoken against the merger having said that his administration “will not approve [the deal]…because it’s too much concentration of power in the hands of too few.”

[11]

Time Warner Finances Going Forward

The news of a merger is coming off of a strong third quarter showing from Time Warner Inc. Coming less than two weeks after the announcement of the AT&T merger, Time Warner reported a third quarter earnings of $1.83 per share on a revenue of $7.2 billion, which was a 9% increase from the expected earnings of $1.37 per share on a revenue of $6.98 billion. These impressive third quarter earnings are a result of many recent successes in content produced by Time Warner, including HBO. Home Box Office saw a 4% increase in revenue to $59 million. Yet, in 2016 while content proved to be king, HBO also saw its content library decrease. With a potential influx of cash due to the potential AT&T merger, HBO can see itself become more like Netflix faster than Netflix can become HBO, contrary to the quote [12] of Netflix CEO Ted Sarandos. Due to the $85 billion dollar pay day Time Warner would receive for the merger, HBO could see its budget for original content increase from $2.2 billion, just a third of what Netflix spends on content. The merger could also result in an affirmation of Jeff Bewkes proposal for “TV Everywhere”[13]. Although the idea has not been a success, AT&T could make it a reality with their wireless subscription package. This idea of Time Warner putting their content “everywhere” will allow for shows like Game of Thrones or Westworld to vastly increase their audience.

Overview

Although many changes are likely coming to Time Warner, no immediate changes will be apparent in the near future. The focus for this next quarter, as well as the new year, will be on accelerating user subscriptions [14] for HBO Now, which could increase in the merger with a bundle package offered with AT&T services.

Sources

Sources:

  1. Top 3 Companies Owned By Time Warner (TWX). Retrieved November 19, 2016. http://www.investopedia.com/articles/markets/102215/top-3-companies-owned-time-warner.asp.
  2. Time Warner Inc. Retrieved November 20, 2016. https://www.britannica.com/topic/Time-Warner-Inc
  3. Westworld’s Shaping Up to Be an Early Ratings Success for HBO. Retrieved October 16, 2016. http://www.vulture.com/2016/10/westworld-premiere-ratings-early-success-for-hbo.html
  4. Westworld: Season One Ratings. Retrieved November 30, 2016. http://tvseriesfinale.com/tv-show/westworld-season-one-ratings/
  5. Suicide Squad. Retrieved November 26, 2016. http://www.boxofficemojo.com/movies/?id=dc2016.htm
  6. Fantastic Beasts and Where to Find Them. Retrieved November 29, 2016. http://www.boxofficemojo.com/movies/?id=fantasticbeasts.htm
  7. Turner Lacking Script For Success. Retrieved November 25, 2016. http://www.broadcastingcable.com/content/turner-lacking-script-success/153449
  8. Warner Bros. Retrieved November 20. http://www.boxofficemojo.com/studio/chart/?studio=warnerbros.htm
  9. ‘The Flash’ Movie Loses ‘Dope’ Rich Famuyiwa (Exclusive). Retrieved on November 2, 2016. http://www.hollywoodreporter.com/heat-vision/flash-movie-loses-dope-director-rick-famuyiwa-942604
  10. AT&T Discussed Idea of Takeover in Time Warner Meetings. Retrieved October 21, 2016. https://www.bloomberg.com/news/articles/2016-10-20/at-t-said-to-discuss-idea-of-takeover-in-time-warner-meetings
  11. What does AT&T, Time Warner Merger mean? Retrieved October 28, 2016. https://www.youtube.com/watch?v=JOt1ZJjLxdo
  12. What the AT&T-Time Warner merger means for HBO. Retrieved October 27, 2016. http://qz.com/818603/what-the-att-time-warner-twx-merger-means-for-hbo/
  13. AT&T’s Time Warner Purchase Acknowledges TV Everywhere’s Failure. Retrieved October 25, 2016. https://www.bloomberg.com/news/articles/2016-10-24/at-t-s-time-warner-purchase-acknowledges-tv-everywhere-s-failure
  14. Time Warner’s Turner Inks Deal for DC Movies. Retrieved November 2, 2016. http://variety.com/2016/biz/news/turner-dc-movies-rights-1201906942/