The Year 2016 May Prove To Be A Fruitful One For Time Warner
Time Warner’s (NYSE:TWX) recently reported Q2 results indicate that 2016 is likely to be a good year for its business. The company has the right portfolio of networks, and we expect nearly all of them to do well. Turner Networks and Warner TV have strong new content lined up, while the U.S. presidential elections will aid CNN’s ratings and ad revenues. The availability of channels on multiple OTT (over the top) providers will be accretive to the bottomline as well. In addition, HBO is sustaining strong growth of 2% with premium content and wide viewership.
Turner Networks & Warner TV May Perform Better Than Expected
Turner Networks together account for more than 45% of the valuation of the company. A concern in the past few years has been the rise of cord-cutters in the U.S. However, the company is addressing this by investing in content and launching a variety of OTT services that allow viewers to watch their favourite shows online. Turner Networks grew 6% in terms of revenue in Q2 in comparison to last year.
Appealing New Content And Presidential Elections
- Turner Networks is coming up with 60 new shows for 2016
- Warner TV is coming up with 31 shows out of which 22 are returning, which is the highest ever returning series number in the history of Warner TV
- The impact can be seen in upfront ad sales season, where sales volumes rose and the prices increased in low single digits (Turner Sees Upfront Volume, Price Gains, Broadcasting Cable, June 30,2016).
- Political ad spending due to U.S. Presidential elections will incremental to Turner’s advertising revenues. In terms of ratings, CNN is leading the prime time section and we are likely to see the positive impact spill over to the next quarter as well. (July 2016 Ratings: CNN Is No. 1 in Prime Time Demo, Adweek, August 02,2016).
Availability On OTT Service Providers And International Expansion
- The company acquired 10% stake in Hulu recently, giving the streaming service direct access to all Turner Networks. Time Warner plans to launch its own live streaming and video on demand services by early next year.
- Time Warner networks are also available on Sling TV and Sony Vue
- In addition, the company is focussing on international expansion of subscription video on demand (SVOD) platforms such as Adult Swim for Canada, Esporte Interativo in Brazil
HBO’s Appeal Could Continue To Draw Attention
HBO’s flagship show Game Of Thrones attracted more than 25 million viewers per episode this year, which is 25% higher than last year’s record. The network’s shows got 94 Emmy nominations, which reflects high quality content. HBO continues to dominate the premium television market space.. In addition to this, HBO Now has started to gain momentum with launch in Latin American and Noridic Countries.
HBO and other OTT services account for 35% of the valuation of Time Warner. We expect the penetration of HBO among the U.S. Pay TV Households to increase by 2% annually for the next 5 years.
“We are currently reviewing our valuation model for TWX in light of recent earnings, and will have an update ready soon.”
Source:
[1] Time Warner (TWX) Jeffrey L. Bewkes on Q2 2016 Results – Earnings Call Transcript, Seeking Alpha, August 03, 2016
[2] Sec Filings
Have more questions about Time Warner? See the links below.
- How Has Time Warner’s Revenue Composition Changed Over The Last 5 Years?
- By What Percentage Did Time Warner’s Revenue & EBITDA Grow In The Last 5 Years?
- By What Percentage Can Time Warner’s Revenue & EBITDA Grow In The Next 3 Years?
- Cable Networks vs Studio: What’s Time Warner’s Revenue and EBITDA Breakdown?
- How Does HBO Compare With Other Premium Networks?
- HBO, HBO Now Will Be Key Growth Drivers For Time Warner
- For Time Warner’s Consumer Products Business, Lego Dimensions And Other Video Games And Licensing Will Fuel Growth
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1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Time Warner
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