English Entertainment
Q2-2015: Warner Bros revenue growth boosts Time Warner revenues by 8.2%
BENGALURU: A 14.9 per cent revenue growth in its Warner Bros segment at $3298 million in the quarter ended 30 June, 2015 (Q2-2015) as compared to the $2870 million in Q2-2014 helped boost Time Warner Inc by 8.2 per cent.
The other two segments – Turner and Home Box Office (HBO) also reported revenue growth to the extent of 2.8 per cent and 1.5 per cent respectively. Time Warner’s revenue in Q2-2015 was $7348 million as compared to the $6788 million in the corresponding year ago quarter. Adjusted Operating Income grew 15 per cent to $1862 million due to increases at Turner and Warner Bros., partially offset by a decline at HBO. Operating Income increased 19 per cent to $1859 million.
Company speak
Time Warner chairman and CEO Jeff Bewkes said, “We had a very strong second quarter, with revenues up 8 per cent and Adjusted Operating Income growing 15 per cent to a quarterly record of $1.9 billion. Our results were led by Turner and Warner Bros and were achieved at a time when we’re investing aggressively to position the company for continued growth, including the successful launch of HBO NOW, our standalone domestic streaming service. HBO and its sister service Cinemax recently received a combined 131 Primetime Emmy nominations, with a record 126 for HBO – the 15th year in a row that HBO has led in nominations. In addition to being nominated for Outstanding Drama Series, Game of Thrones‘ fifth season set a new record for viewers of an HBO series.”
Bewkes continued, “At Turner, TNT and TBS ranked as the #1 and #2 ad-supported cable networks, respectively, in primetime among adults 18-49, and together with Adult Swim claimed the top 3 spots in primetime among adults 18-34. Cartoon Network was again the only top 3 kids network to grow its 6-11 audience during the quarter and claimed the #2 spot for the first time. And CNN grew primetime viewership in its key 25-54 demo 25 per cent with the help of its award-winning original programming. Warner Bros concluded a very successful upfront, with 62 programs slated for the upcoming television season, including 29 on broadcast networks. That includes a record 20 returning shows and makes Warner Bros. the top supplier of broadcast series again this year. In the quarter, Warner Bros games business also shined with releases of Batman: Arkham Knight and Mortal Kombat X helping make it the top videogame publisher for the first half of the year. Reflecting our commitment to provide direct returns to shareholders, we have returned more than $2.6 billion in dividends and share repurchases year-to-date.”
Segment performance
Turner
Revenues increased 2.8 per cent ($77 million) to $2827 million, benefiting from growth of 48 per cent ($69 million) in Content and other revenues and two per cent ($20 million) in Subscription revenues, partially offset by a decline of one per cent ($12 million) in Advertising revenues. The increase in Content and other revenues was due to the licensing of select Turner original programming to Hulu. Subscription revenues grew due to higher domestic rates and local currency growth at Turner’s international networks, partially offset by the impact of foreign exchange rates. Advertising revenues declined due to the impact of foreign exchange rates, partially offset by growth at Turner’s domestic businesses and local currency growth at Turner’s international networks. The increase in domestic advertising was due to growth at Turner’s domestic news businesses and the 2015 NCAA Division I Men’s Basketball Championship tournament, partially offset by lower delivery at certain domestic networks and the absence of NASCAR programming. Advertising revenue growth was also adversely impacted by fewer NBA playoff games in the quarter.
Adjusted Operating Income increased 20 per cent ($190 million) to $1130 million, due to the increase in revenues and lower expenses, including lower programming costs. Programming costs decreased nine per cent primarily due to the absence of NASCAR programming as well as lower syndicated programming expenses as a result of the abandonment of certain programming in 2014. Operating Income increased 22 per cent ($201 million) to $1130 million.
Home Box Office
HBO revenue increased one per cent ($21 million) to $1438 million, due to an increase of four per cent ($40 million) in subscription revenues, partially offset by a decline of seven per cent ($19 million) in Content and other revenues. Subscription revenues grew due to higher domestic rates, partially offset by lower international revenue, which included the impact of the transfer to Turner of the operation of HBO’s basic cable network in India. The decrease in Content and other revenues reflected lower home entertainment revenues.
Adjusted Operating Income decreased eight per cent ($44 million) to $508 million, as the increase in revenues was more than offset by higher marketing and technology costs, primarily related to the launch of HBO NOW, HBO’s stand-alone streaming service. Operating Income decreased seven per cent ($40 million) to $508 million.
Warner Bros
The revenue increase mentioned above reflects higher videogames and television licensing revenues, partially offset by lower theatrical revenues and the impact of foreign exchange rates. The increase in videogames revenues was primarily due to the releases of Batman: Arkham Knight and Mortal Kombat X. Television licensing revenues benefited from the second-cycle syndication of The Big Bang Theory and the subscription video-on-demand licensing ofSeinfeld. Theatrical revenues decreased primarily due to lower worldwide television licensing revenues of theatrical product and a decline in home entertainment revenues due to the comparison against the release of The Hobbit: The Desolation of Smaug in the prior year quarter.
Adjusted Operating Income increased 46 per cent ($108 million) to $344 million, due to the increase in revenues, partially offset by associated film and print and advertising costs, as well as higher theatrical valuation adjustments. Operating Income increased 46 per cent ($107 million) to $341 million.
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.
