Friday, December 11, 2015

Time Warner Inc. (TWX) comments [CEO Jeff Bewkes] from UBS Conference (12/08/2015)

43rd Annual Global Media and Communications Conference
Time Warner Inc. (TWX)
Speaker: CEO Jeff Bewkes
Tuesday: 12/08/2015

Notes:
  • Goals for now? Focus on long-term. Been a combination of operational and prudent capital allocation. Having right mix of assets, networks, production, is really important given whats going on in the world and industry. Focus going forward: (1) invest in best content, (2) appropriate use of technology, what is in-house, whats outside, (3) internationally, (4) operational efficiencies and capital allocation efficiencies. All see a huge demand in the world for “on-demand” viewing. That results in tremendous advantages for companies that have right businesses and right global brands. We focus on quality, right brands – Turner, HBO, Warner Bros. Opportunities that exist for big brands are for current ecosystem, such as reinvigorating the ecosystem, but also outside it. Time Warner & HBO are in good position. There is tremendous turmoil in industry, will lead to success and misfortunes for some.
  • Need, from a consumer point of view, want to watch content on any device, shouldn’t need advanced degrees to do this. We should pick up devices and be simple. Shouldn’t be that you have to know whats on TNT. Look at VOD, cable channels, linear, in a seamless interface.
  • TV multi-channel: reached extraordinary penetration for many years, it has a loyalty, its habit. Programming investments are getting better. To authenticate across all devices is difficult. We want to help Apple, distributors. We want to compliment Verizon and Comcast for their user interface, but they need more.
  • TV Solutions -  Hulu? Won’t comment on it as strategic investment. Hulu is a good service. We are one of the entities that could help with the interface product. If interfaces across all would be more vigorous, would help.
  • We are making some investments in digital, but biggest issue was foreign exchange number. We want to highlight that we focus on growth for the long term. Have been investing in content for HBO Now – John Stewart, etc. Not major infrastructure. The new world – strong network presence inside the ecosystem and outside – means there will be more company capabilities that needs to be developed. We want to increase revenue growth line and earnings as well.
  • Most content companies believe the bundle is the best for now…? We haven't seen any tipping point disruption yet, saw some subscriber weakness and ratings decline but nothing big enough. Our focus has been on HBO Now, which is global. Warner Bros. has partnered with SVOD services in China and SE Asia. CNN Go product has been well received and viewed. Apple/CNN product that is going on. We bought i-Stream-Planet which helps us put any network on a broadband delivered basis. We don’t call it disruption, we call it opportunity.
  • Finish to 2015, ad market? Coming in at strong double digit EPS rate, which if we absorb $0.45- $0.50 FX headwind, we would’ve grown 20%. On the ad side – scatter is up double digits, which bodes well for 2016. Theatrical wasn’t as strong in 2015, though.
  • HBO: will be huge 2016. Some new shows – Vinal (1 hour show by Mick Jagger/ Martin Scorsese), Divorce (Sarah Jessica Parker), and other shows. John Stewart, Bill Simmons, Sesame Street, etc. Also have distribution coming into play with Xbox and PlayStation, means we have all distribution in place to be more aggressive with marketing because we can fulfill the demand. Smaller bundles helps HBO, helps them get through  better.
  • HBO has higher retail price versus some others, but smaller content, how is position? Quibble with “modest” content comment, we have thousands of hours of content. HBO has biggest, best, widest new movies of any company in the world. Then go to 30 min shows, 1 hour shows, comedies, sports shows – huge genre selection – HBO has adequate budget for $1 billion for original programming to get this high quality. Helps to have Turner and Warner Bros. as well.
  • Overseas – too early for OTT? Sometimes the development of infrastructure plant as the reason if too early. Licensing show that is branded HBO – Canada, UK, France, Italy, Germany. Attractive risk/return deal. Far better method of distribution.
  • Warner Bros positioning? 2015 strong year. 2016 shifting more to numerous big franchise. Will lead the industry in TV. Batman vs. Superman, Suicide Squad, Fantastic Beasts (Harry Potter), Stirrups (animated), Nights of the Round Table (King Arthur). Top 2 new shows + #1 comedy (Big Bang Theory). DC Comics doing well. Lego, JK Rollings, etc.
  • Acquired programming: become less predictably valuable over long stretch as move to VOD and SVOD. Real place for acquired shows, to get picked up by TNT, should be a hit show.
  • Original programming: more activity for Warner TV to produce first run, but to add cable production for other networks – Showtime, FX. 
  • Health of syndication market worldwide – has been a very strong secular support level and is growing.
  • Gotham – 1st season was good, went on SVOD, 2nd season not as strong
  • Is having a show on SVOD going to hurt the ratings of shows? Don’t think so, think it’s the opposite. Think the data will support this as well. Gotham – 2nd year, is on-line with second half of first year. Interest to track a season from the beginning will increase.
  • On-Demand is like a volume control, it’s a feature.
  • DC, Lego, Harry Potter world. Wonder Woman – script is good, could bring underrepresented female audience to the genre. Also has 2 LEGO movies coming out.
  • Turner – how positioned for growth? 2015 Turner had substantial earnings growth, more from cost actions. 2016 more from revenue. Ad market starting well with scatter pricing in double digits. Affiliate fee is low-double digits, on-track, been saying that last 2 years. Specifically – low-teens % on affiliate fees. Double digits is too low, has to be in the teens (laughs). Have to translate back to dollars but strong organic growth.
  • Should have strong shows coming in 2016 – TBS, TNT. It is a big budget. Tremendous conversation between Warner Bros., Turner, and HBO to collaborate.
  • NFL? We like it but don’t have to have it. It would have to come at economic secretive way. Thursday package is the issue. Reason is good position – if you take mix of Turner channels, from affiliate and ad – have NBA out to 2025, NCAA March Madness to 2024, baseball to 2021. Have strong sports offering. Interested in NFL, but don’t have to have it.
  • Balance sheet or capital deployment changes? None.
  • Message to audience? Watch more TV. If you think about whats going on in media, it is very exciting time. Everyone is aware of challenges, concerned about if companies will evolve fast enough and strong enough. Media has to make the right decisions. We think it is very important to have the best content and best network. It has to be On Demand, will do whatever it takes to make it available to current ecosystem and future ecosystem. TWX has the scale on a global basis. 


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