Time Warner CFO Touts Growth Outlook, Sees Rising TV Content Costs in 2014

3:34 AM PST 11/21/2013 by Georg Szalai
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At a conference in Barcelona, John Martin, who is set to take over the conglomerate's TV networks unit, cites TV network affiliate fee hikes and a strong film slate as causes for optimism.

Time Warner is optimistic that it can continue to grow its financials after several years of earnings growth, outgoing CFO John Martin told a Morgan Stanley investor conference in Barcelona Thursday.

He reiterated that TW expects a record year at its networks division and that it could even see a record operating profit at Warner Bros.

Discussing management's outlook, Martin said "the goal and objective is to keep growth going." Helping TW is the "growing demand for high-quality, popular content," which the company focuses on, driven by technology and international opportunities.

Martin is set to take over TW's Turner Broadcasting TV networks unit next year.

He reiterated guidance that the Turner networks in the U.S. will grow affiliate fee revenue in the 2014-2016 period by double digit percentages. The business currently makes about $4 billion in affiliate revenue, with the coming three years set for what he called "meaningful acceleration." Martin said carriage fee revenue growth will come in around the 10 percent mark next year, followed by a slight moderation in 2015 and strong double-digit growth in 2016.

HBO is also in the early stages of faster subscriber revenue growth, Martin told the conference.

Asked about 2014, the CFO said another strong year should be in store at Warner TV despite tough comparisons. And he said he was bullish on next year's film slate. "We have another Harry Potter movie," he said before correcting himself and mentioning another Hobbit movie. "I wish," he quipped about his Potter slip of tongue.

But he touted the strength of the Hobbit franchise and emphasized that Warner Bros. has struck a deal with Potter author J.K. Rowling that will bring more of her creations to the screen over time.

Martin also mentioned Edge of Tomorrow with Tom Cruise as a key tentpole release next year. "Trust me, it will be great," he said.

After the Time Inc. spin-off, eyed for the second quarter, 90 percent of TW's profit will come from the TV eco-system, Martin told the Morgan Stanley conference. That will further opportunities for cooperation about the remaining businesses. Asked about management changes at Warner Bros. and his coming move to Turner, Martin said HBO boss Richard Plepler, Warner chief Kevin Tsujihara and he are all ambitious and motivated. And executives can "collaborate better at smaller, more focused company," he said without detailing possible collaborations.

Martin on Thursday also mentioned that in the TV networks unit, 2012 programming costs were up only 2 percent, and they will be up 2 percent-5 percent in 2013, both at the low end or below management's goal of mid to high single digit percentage growth. "Next year we will be at the higher end," he said though. He cited the first year of a new Major League Baseball contract and an acceleration of amortization of NCAA costs.

"We will make strategic investments [now to ensure we have] a sustainable future" of growth at the networks, he said.

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai

 

 

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