A small event, yet it makes one think about the future of reruns and the role they play for certain pay-TV networks. TBS & TNT, in particular, depend notably upon reruns, although slowly that has changed with the inclusion of more original programming. Nevertheless, with online streaming companies such as Netflix (NASDAQ:NFLX) bidding for older content, networks that depend on reruns may be at a risk. TBS & TNT together constitute close to 15% of Time Warner’s value and that can’t be ignored.
One obvious solution is to generate more original programming for these channels and certainly Time Warner is aware of that. The second solution is bidding early and bidding steep. As long as rerun programming remains a notable portion of these networks, they will want to outbid Netflix and other online streaming companies. TBS & TNT are under Time Warner which certainly has deep pockets to do so.
If older content is sold to multiple networks including Netflix, the availability on Netflix could lower the attractiveness of channels such as TBS and TNT which feature several programming reruns. In fact, early last year, TBS opted out of a particular rerun bid saying that the program was quite prevalent over the web.
Our price estimate for Time Warner stands at about $40, implying a premium of little under 10% to the market price.Notes:
- Warner Bros. Sells ‘2 Broke Girls’ Reruns to Stations, TBS, Bloomberg, June 21 2012 [↩]