Lizzie Michael and Andrew Maercklein

Time Warner, Inc.

One Time Warner Center
New York, NY 10019-8016
212-484-8000

Company

Time Warner, Inc. is an entertainment and media conglomerate whose works and influence reaches all over the world. First created in 1989 in a $14 billion merger between Time, Inc. and Warner Communications, Time Warner now owns magazines such as Time, People, and Sports Illustrated; HBO, The CW, and Cinemax, as well as the Turner Broadcasting System, which in turn holds networks such as TBS, CNN and Cartoon Network; DC Comics; and one of the world’s largest production companies, Warner Brothers Entertainment. [2] [3].

The company has undergone a few trouble spots in the past, including a $164 deal with AOL in the year 2000. [5]. The deal, which eventually proved to be misguided and led to major financial losses in 2002, was said to be “the biggest mistake in corporate history” by current CEO and Chairman Jeff Bewkes. [6]. That being said, Time Warner has since rebouded and is currently enjoying success from several of its assets, including HBO and Warner Brothers, and is looking forward to the completion of an acquisition, with a total transaction value of
$108.7 billion, with AT&T. [7].

Who are some key executives?

Financial information

Time Warner is a publicly traded company on the NYSE under the ticket TWX. As of 11/17/16, their current stock price is $93.20, as compared to one of their primary competitors, Walt Disney Co., who is at $98.82. [9]. On Oct. 27 the company announced cash dividends for Common Stock at $0.4025 per share, with a record date of Nov. 30. and a payment date of Dec. 15. [10] [11]. Thanks in part to the AT&T announcement, Time Warner’s stock has been on the upswing, having increased nearly 22.07% since April 2016; additionally, about 67% of analysts covering Warner’s stock rate this as a good time to buy. [11].

In Warner’s 3rd quarter reports for 2016, total revenues for Turner, HBO, and Warner Broadcasting combined were at more than $7 billion, and there was an increase of $153 million in cash and cash equivalents. [13]. With the recently released Fantastic Beasts and Where to Find Them and HBO’s Westworld recently having success, revenues from ticket sales and merchandising for Time Warner can be expected to increase in 2016’s 4th quarter, and should give the company a strong year-end yield. [14].

Warner Brothers

Warner Bros., which was founded in 1923 and notably produced the first “talkie” in 1927’s The Jazz Singer, is one of the largest production companies in the world, with both New Line Cinema and DC Films in its toolbox. [16]. In 2015, Warner Bros.’ worldwide box office receipts exceeded $3 billion for the ninth consecutive year ($3.71 billion worldwide), and saw both international and domestic reaching the billions. [17].

[18]

The company houses several major franchises, including the Matrix series, the Harry Potter Franchise, and the world of DC Comics. In 2016 alone, multiple films were released to massive success, including Batman v Superman: Dawn of Justice, Sully, Suicide Squad, and Fantastic Beasts and Where to Find Them. Suicide Squad was in theaters for an impressive 14 weeks and earned more than $700 million worldwide, while Fantastic Beasts has been open for less than two weeks and has already made nearly $500 million. [19] [20].

This success will likely carry into 2017, as Wonder Woman, Justice League, and two more animated Lego movies are all slated for wide release. [21].

In news besides its releases, Warner Bros. also recently announced it will acquire Machinima, a “global programming service and production company” with a focus on gamer culture. [23]. The deal, which was estimated to be just slightly under $100 million, will allow Machinima to be its own entity within the Warner Bros. Digital Networks. [24].

HBO

Home Box Office, or HBO, is one of Time Warner’s most successful divisions. In terms of its financial performance, in the 2016 third quarter HBO’s revenues increased 4%, or $59 million, to $1.4 billion due to a 5% increase in subscription revenues. [12].

HBO’s content has gone over incredibly well with viewers. HBO took home 22 Primetime Emmys at the 2016 Emmy Awards, the most of any other network for the 15^th year in a row. [12] [29]. Shows such as Veep, Game of Thrones, and Last Night with John Oliver all have loyal fan bases, while newcomer Westworld premiered in October 2016 to more than 13 million viewers. [12].

In other news, HBO just recently launched a new video streaming service in Spain, HBO España, that is expected to very well. The service offers both original HBO content, as well as films and programming from other networks as well, like Disney, Nickelodeon, and other Spanish programming. [30].

AT&T Merger

Click here for AT&T and Time Warner Merger (Video): http://nyti.ms/2exY5SK [27]

AT&T is looking to purchase Time Warner, Inc. in a $85 billion deal, and despite many setbacks, AT&T is confident the deal will go through. [25]. Were the FCC to oversee this deal, the time frame would have been elongated and the deal itself would be much less likely to go into effect. However, it is likely the deal will not be subject to the tight restrictions set by the FCC, as the FCC may be excluded from the process and the decision will be made by the Department of Justice. Randall L. Stephenson, the CEO of AT&T, is very optimistic regarding this scenario and said this deal will satisfy not only those looking for earnings growth, but also investors that are simply searching for income. [27]. However, this deal will cause AT&T to push its debt upwards of $190 billion. [27]. The average user of DirecTV Now will pay $35 per month, which translates to $1.32 gross margin, and despite an apparent lack of funding, there are expected to be approximately 15 million paid subscribers by 2020. [26].

Many investors are skeptical of the deal and doubt the level of success predicted by AT&T. AT&T, being the only company of its competitors to move in this direction, will be able to corner a large section of the market before anyone else. Through securing customers with a low price now, AT&T hopes to attract many more consumers in the future while still being able to raise the price of service as necessary. [26]. Furthermore, AT&T wants to boost their wireless business in an attempt to take back some of the market from other wireless companies. They plan to do this by allowing wireless users to watch DirecTV without using data. This is known as zero-rating and it’s frowned upon by the FCC because it would allow for AT&T to reduce competition, especially among its own assets. [25]. Between the low prices as well as other incentives to switch, AT&T is focused on increasing its consumer following as opposed to generating revenue. Revenue will theoretically be the focus after AT&T has accrued a mass following. In addition, it’s predicted there will be less subscription cancellations as well as a large boost in advertising revenue. [25]. Should the deal be successful, it will be one of the largest to date and will push AT&T further ahead of competitors. Should the deal not be approved, or even fail, AT&T will have to tread very carefully to avoid serious damage to the company’s finances, as well as the integrity of the company.

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Resources

[1] Time Warner Cables Customer Service Phone Number, Office Address, Toll Free Helpline Support. Retrieved November 27, 2016. http://www.officeaddresshelplinenumber.com/time-warner-cables-customer-service-phone-number-office-address-toll-free-helpline-support/

[2] The Creator of Time Warner, Steven J. Ross, Is Dead at 65. Retrieved November 27, 2016. http://www.nytimes.com/1992/12/21/obituaries/the-creator-of-time-warner-steven-j-ross-is-dead-at-65.html

[3] Top 3 Companies Owned By Time Warner (TWX). Retrieved November 27, 2016. http://www.investopedia.com/articles/markets/102215/top-3-companies-owned-time-warner.asp

[4] Company Profile. Retrieved November 27, 2016. http://www.timewarner.com/company

[5] Statistics on Mergers. Retrieved November 27, 2016. https://web.archive.org/web/20120106045040/http://www.imaa-institute.org/statistics-mergers-acquisitions.html

[6] AOL merger was ‘the biggest mistake in corporate history’, believes Time Warner chief Jeff Bewkes. Retrieved November 27, 2016. http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/media/8031227/AOL-merger-was-the-biggest-mistake-in-corporate-history-believes-Time-Warner-chief-Jeff-Bewkes.html

[7] AT&T to Acquire Time Warner. Retrieved November 27, 2016. http://about.att.com/story/att_to_acquire_time_warner.html

[8] Senior Corporate Executives. Retrieved November 27, 2016. http://www.timewarner.com/company/management/senior-corporate-executives

[9] TWX: NY. Retrieved November 27, 2016. https://www.bloomberg.com/quote/TWX:US

[10] Time Warner Declares Regular Quarterly Cash Dividend. Retrieved November 27, 2016. http://www.timewarner.com/newsroom/press-releases/2016/10/27/time-warner-declares-regular-quarterly-cash-dividend

[11] Dividend Action: Time Warner Inc. (NYSE:TWX) advises to “Mark your calendars” for Dec 15, 2016; dividends expected to reach $0.40. Retrieved November 27, 2016. http://friscofastball.com/2016/11/27/dividend-action-time-warner-inc-nysetwx-advises-to-mark-your-calendars-for-dec-15-2016-dividends-expected-to-reach-0-40/

[12] Time Warner Inc. Revenue & Earnings Per Share (EPS). Retrieved November 27, 2016. http://www.nasdaq.com/symbol/twx/revenue-eps

[13] Earnings Releases & Related Materials. Retrieved November 27, 2016. http://ir.timewarner.com/phoenix.zhtml?c=70972&p=quarterlyearnings

[14] Weekend Box Office: November 25-27, 2016. Retrieved November 27, 2016. http://www.boxofficemojo.com/weekend/chart/

[15] Warner Bros. Logo Design Evolution. Retrieved November 28, 2016. http://annyas.com/screenshots/warner-bros-logo/

[16] Warner Bros. Entertainment Inc. Retrieved November 28, 2016. http://www.warnerbros.com/studio/divisions/warner-bros-entertainment-inc

[17] Warner Bros. Pictures. Retrieved November 28, 2016. http://www.warnerbros.com/studio/divisions/warner-bros-pictures

[18] Fantastic Beasts and Where to Find Them – Final Trailer [HD]. Retrieved November 28, 2016. https://www.youtube.com/watch?v=Vso5o11LuGU

[19] Box Office Mojo: Suicide Squad. Retrieved November 28, 2016. http://www.boxofficemojo.com/movies/?id=dc2016.htm

[20] Box Office Mojo: Fantastic Beasts and Where to Find Them. Retrieved November 28, 2016. http://www.boxofficemojo.com/movies/?id=fantasticbeasts.htm

[21] Warner Bros., Quietly Thriving, Recasts Its Own Story. Retrieved November 28, 2016. http://www.nytimes.com/2016/11/08/business/media/warner-bros-quietly-thriving-recasts-its-own-story.html

[22] Machinima. Retrieved November 28, 2016. http://www.machinima.com/

[23] Warner Bros. Entertainment to Acquire Machinima. Retrieved November 28, 2016.  http://www.warnerbros.com/studio/news/warner-bros-entertainment-acquire-machinima

[24] Warner Bros. Acquires Full Control of Machinima. Retrieved November 28, 2016. http://variety.com/2016/digital/news/warner-bros-acquires-machinima-1201920793/

[25] McAlone, Nathan. “Here’s Why AT&T Is Buying Time Warner, and Why It Thinks the Government Can’t Stop the Sale.” Business Insider. Business Insider, Inc, 15 Nov. 2016. Web. 28 Nov. 2016. http://www.businessinsider.com/att-time-warner-merger-government-regulation-2016-11

[26] Molla, Rani, and Shira Ovide. “AT&T Plays It Forward.” Bloomberg.com. Bloomberg, 23 Nov. 2016. Web. 28 Nov. 2016. https://www.bloomberg.com/gadfly/articles/2016-11-23/at-t-wants-digital-video-share-with-direct-tv-now

[27] Morgenson, Gretchen. “The AT&T-Time Warner Merger: A Match Built on Hope.” The New York Times. The New York Times, 28 Oct. 2016. Web. 28 Nov. 2016.  http://www.nytimes.com/2016/10/30/business/the-att-time-warner-merger-a-match-built-on-hope.html?_r=0

[28] LLC, UnderConsideration. “Reviewed.” Brand New: New Logo and Identity for AT&T by Interbrand. N.p., n.d. Web. 28 Nov. 2016.  http://www.underconsideration.com/brandnew/archives/new_logo_and_identity_for_att_by_interbrand.php#.WDyz-6IrL_Q

[29] How FX Broke HBO’s Grip on the Emmy Awards. Retrieved November 28, 2016. http://fortune.com/2016/09/19/emmy-awards-2016-hbo-fx/

[30] HBO Launches in Spain, Adds Content from Disney, Nickelodeon. Retrieved November 28, 2016. http://variety.com/2016/biz/global/hbo-espana-spain-disney-nickelodeon1201927778-1201927778/

[31] HBO Logos. Retrieved November 28, 2016. https://www.homeboxoffice.com/lodging/cmp/logos.html