English Entertainment
Q1-2015: Turner record results overcome Warner Bros, HBO downturn for Time Warner
BENGALURU: Turner’s record adjusted operating income growth of 26 per cent to $1128 million for Q1-2015 as compared to the $895 million in Q1-2014 was offset in part by declines at Warner Bros. and Home Box Office (HBO) says Time Warner Inc.
Time Warner’s adjusted operating income grew 11.6 per cent to a record $1814 million during the quarter ended 31 March, 2015 (Q1-2015, current quarter) as compared to the $1626 million in Q1-2014. Time Warner revenue was up 4.8 per cent to $7127 million in Q1-2015 as compared to the $6803 million during the corresponding quarter of last year. The revenue increase was due to growth in all divisions says the company.
Time Warner chairman and CEO Jeff Bewkes said, “We got off to a very strong start in 2015, with revenues up five per cent, and adjusted operating income growing 12 per cent to a quarterly record of $1.8 billion. This led to a 23 per cent increase in adjusted EPS and puts us on track to achieve our goals for the year. We accomplished a lot in the quarter, led by Turner, which had its best quarter ever, with audience growth across a number of its networks. The NCAA Men’s Basketball Tournament was a huge multiplatform success, with its highest average television viewership in over two decades helping make TBS the #1 ad-supported cable network in primetime among adults 18-49 in the quarter. And March Madness Live served more than 80 million live video streams and grew its usage by almost 20 per cent over last year’s tournament. Warner Bros. led the domestic box office for the quarter on the strength of American Sniper, which brought in well over $500 million globally. Warner Bros. also continued to lead the industry in television production, including the #1 comedy and unscripted series among adults 18-49 on television this season. HBO once again grew domestic subscribers in the quarter while continuing to gain acclaim for groundbreaking programming such as the recent documentaries Going Clear: Scientology and The Prison of Belief and The Jinx: The Life and Deaths of Robert Durst. The return of Game of Thrones reached a new premiere high, while also providing the backdrop for the highly-anticipated launch of HBO Now, our standalone streaming version of HBO – which is off to a great start. Reflecting our strong commitment to provide direct returns to shareholders, we returned more than $1.4 billion in dividends and share repurchases year-to-date.”
Segment Results
Turner
Turner reported 4.5 per cent growth in revenue to $2710 million in Q1-2015 from $2593 million in Q1-2014. Turner’s adjusted operating income has been mentioned above.
The company says that Turner benefited from growth of four per cent ($42 million) in advertising revenues, three per cent ($38 million) in subscription revenues and 25 per cent ($37 million) in content and other revenues.
Turner advertising revenues benefited from growth at Turner’s domestic businesses mainly due to the 2015 NCAA Division I Men’s Basketball Championship tournament (NCAA Tournament) and growth at Turner’s news businesses. Subscription revenues grew due to higher domestic rates partially offset by lower domestic subscribers. Both international advertising and international subscription revenue growth were more than offset by the impact of foreign exchange rates. The increase in content and other revenues was due to higher subscription video-on-demand revenues.
Turner’s adjusted operating income increased 26 per cent primarily due to higher revenues and lower expenses, including lower marketing, programming and general and administrative costs, largely as a result of operational efficiency initiatives and timing. Programming costs declined three per cent due primarily to timing and lower syndicated programming expenses as a result of the abandonment of certain programming in 2014.
HBO
Home Box Office revenue in Q1-2015 was up 4.4 per cent to $1398 million as compared to the $1339 million in Q1-2014. Adjusted operating income fell 1.3 per cent to $458 million in Q1-2015 from $468 million in the corresponding year ago quarter.
According to the company, HBO revenues grew four per cent and reflect increases of four per cent ($49 million) in subscription revenues and five per cent ($10 million) in content and other revenues. Subscription revenues increased primarily due to higher domestic rates, partially offset by the transfer to Turner of the operation of HBO’s basic cable network in India. The increase in content and other revenues reflected higher home entertainment revenues and higher international licensing revenues.
HBO adjusted operating income declined one per cent ($6 million) to $458 million, as higher revenues were more than offset by higher programming, distribution and marketing costs. Programming costs grew nine per cent, primarily due to increased expenses for original programming. Distribution costs increased primarily due to higher participation expenses. The increase in marketing costs was primarily related to the launch of HBO Now.
Time Warner informs that through the first two weeks, the fifth season premiere of Game of Thrones totalled 18.1 million gross viewers, over one million more viewers than the prior season’s first episode after the same period of time. In April 2015, Home Box Office launched HBO Now, its stand-alone streaming service, in the US.
Warner Bros
Warner Bros revenue grew 4.3 per cent to $3199 million in the current year from $3066 million in Q1-2014. Adjusted operating income declined 13.2 per cent to $330 million in Q1-2015 from $380 million reported in the corresponding year ago quarter.
Warner Bros revenue increase, reflects higher television licensing revenues primarily due to the subscription video-on-demand sale of Friends and higher revenues from videogames. Revenues also benefited from growth in theatrical revenues led by the strong performance of American Sniper. The increase was partially offset by the effect of foreign currency exchange rates.
Adjusted Operating Income declined 13.2 per cent, as higher revenues were more than offset by higher film and advertising costs due to the mix of theatrical releases and videogame product.
Through 27 April, American Sniper grossed over $540 million at the worldwide box office. On 9 April, Warner Bros., its TT Games business and The Lego Group announced Lego Dimensions, a videogame experience that combines physical Lego brick building toys based on multiple franchises, including Warner Bros.’ DC Comics, The Lord of the Rings and The Lego Movie, with interactive console gameplay.
UK: The aerial is losing its grip. As broadband becomes the default way Britons watch television, the UK is edging towards a decisive, and divisive, question: should Freeview be switched off by 2034? The issue, highlighted in reporting by The Guardian, has exposed deep fault lines over access, affordability and the future of public service broadcasting.
For nearly 25 years, Freeview has delivered free-to-air television from the BBC, ITV, Channel 4 and Channel 5 to almost every corner of the country. Even now, it remains the UK’s largest TV platform, used in more than 16m homes and on around 10m main household sets. Yet the same broadcasters that built it are now pressing for its closure within eight years.
Their case rests on a structural shift in viewing. Smart TVs, superfast broadband and the Netflix-led streaming boom have pulled audiences online. Advertising economics have followed. By 2034, the number of homes using Freeview as their main TV set is forecast to fall from a peak of almost 12m in 2012 to fewer than 2m, making digital terrestrial television, or DTT, increasingly costly to sustain.
But critics say the rush to switch off risks abandoning those least able, or least willing, to move online.
“I don’t want to be choosing apps and making new accounts,” says Lynette, 80, from Kent. “It is time-consuming and irritating trying to work out where I want to be, to remember the sequence of clicks, with hieroglyphics instead of words. If I make a mistake I have to start again.”
Lynette is among nearly 100,000 people who have signed a “save Freeview” petition launched by campaign group Silver Voices. She fears the government is about to “take [Freeview] away from me and others who either don’t like, can’t afford, or can’t use online versions”.
Official figures underline the fault lines. A report commissioned by the Department for Culture, Media and Sport estimates that by 2035, 1.8m homes will still depend on Freeview. Ofcom’s analysis shows those households are more likely to be disabled, older, living alone, female, and based in the north of England, Wales, Scotland and Northern Ireland.
Freeview is owned by the public service broadcasters through Everyone TV, which also operates Freesat and the newer streaming platform Freely. After two years of review, DCMS is expected to set out its position soon, drawing on three options proposed by Ofcom: a costly upgrade of Freeview’s ageing technology; maintaining a bare-bones service with only core PSB channels; or a full switch-off during the 2030s.
The broadcasters have rallied behind the third option. They argue that 2034 is the logical cut-off, when transmission contracts with network operator Arqiva expire. By then, they say, the cost of broadcasting to a dwindling audience will far outweigh the returns from TV advertising.
Ofcom agrees a crunch point is approaching. In July, the regulator warned of a “tipping point” within the next few years, after which it will no longer be commercially viable for broadcasters to carry the costs of DTT.
Others see risks beyond economics. Questions remain over whether internet TV can reliably deliver emergency broadcasts, such as the daily Covid updates, in the way that universally available DTT can. The UK radio industry has also warned that an internet-only future for TV could push up distribution costs and force some radio stations off air if PSBs no longer share Arqiva’s mast network.
“It is a political hot potato,” says Dennis Reed, founder of Silver Voices, who says he has “dissociated” his organisation from the government’s stakeholder forum, which he believes is “heavily biased” towards streaming.
The Future TV Taskforce, representing the PSBs, counters that moving online could “close the digital divide once and for all”. “We want to be able to plan to ensure that no one is left behind,” a spokesperson says, adding that rising DTT costs could otherwise mean cuts to programme budgets.
The numbers show the scale of the challenge. Of the 1.8m Freeview-dependent homes projected for 2035, around 1.1m are expected to have broadband but not use it for TV. The remaining 700,000 are forecast to lack a broadband connection altogether.
Veterans of the analogue switch-off, completed in 2012 after 76 years, recall similar fears of “TV blackout chaos”. Around 6 per cent of households were labelled “digital refuseniks”, yet a targeted help scheme and a national campaign, fronted by a robot called Digit Al voiced by Matt Lucas, delivered a largely smooth transition.
This time, the BBC is less keen to foot the bill. Tim Davie, the outgoing director general, has said the corporation should not fund a comparable support programme for a Freeview switch-off.
Research for Sky by Oliver & Ohlbaum suggests that with early awareness campaigns and digital inclusion measures, only about 330,000 households would ultimately need hands-on help ahead of a 2034 shutdown.
Meanwhile, viewing habits continue to fragment. Audience body Barb says 7 per cent of UK households no longer own a TV set, choosing to watch on other devices. In December, YouTube overtook the BBC’s combined channels in total UK viewing across TVs, smartphones and tablets, albeit measured at a minimum of three minutes.
That shift may accelerate. YouTube has recently blocked Barb and its partner Kantar from accessing viewing session data, limiting transparency just as online platforms consolidate power.
“When the government chose British Satellite Broadcasting as the ‘winner’ in satellite TV it was Rupert Murdoch’s Sky instead that came out on top,” says a senior TV executive quoted by The Guardian. “There already is such an outsider ready to be the winner in the transition to internet TV; it is YouTube.”
Freeview’s future now hangs on a familiar British dilemma: modernise fast and risk exclusion, or protect universality and pay the price. Either way, the aerial’s days as king of the living room look numbered.
