Time Warner CFO Touts International Growth, Stays Mum on Magazine Unit Sale

10:34 AM PST 02/27/2013 by Georg Szalai
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UPDATED: He signals that HBO could launch more standalone broadband services abroad and says that digital licensing of TV content will be a sustainable revenue stream.

Time Warner CFO John Martin on Wednesday declined to comment on recent reports that the media conglomerate was looking at selling a big part of its Time Inc. magazine unit.

Speaking at the Morgan Stanley Technology, Media & Telecom Conference in San Francisco in a session that was webcast, he said, "we don't comment on press speculation." Meredith Corp. is believed to have approached the company about a deal.

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But he reiterated TW management's confidence in the upside potential for the company's international TV networks and U.S. carriage fee revenue.

TW's international networks business, including unconsolidated operations, now brings in about $3 billion in annual revenue and $650 million in operating profit, he said, predicting further growth ahead. A recent streamlining of operations in Europe and cost management will contribute to margin improvements just like revenue upside opportunities will, he said.

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HBO's international business contributes about 25 percent of the premium TV company's total, with double-digit financial growth in recent years and 35 percent subscriber growth last year, Martin said. He cited the more than 70 million subscribers to HBO networks in 60 countries outside the U.S. as providing room for further growth, including with the help of the launch of the HBO Go broadband service, which has been a success in the U.S. Martin reiterated a previously mentioned target of $1 billion in international networks operating profit that should be reached in the coming years. A recent streamlining of operations in Europe and cost management will contribute to margin improvements just like revenue upside opportunities will, he said.

Martin said the HBO Go rollout in Europe will be completed this year, with additional launches in Latin America planned in 2013. The year will also see the start of a rollout in Asia, he added.

The CFO also said that HBO licenses its programming in another 150 countries, in some of which HBO could launch broadband-only services. The company last year announced such an over-the-top experiment in Scandinavia. "It's too early to tell how it's going," he said. 

The Turner and HBO units will also continue to look for opportunities to launch new networks abroad as TW recently did in the Netherlands and, this week, in India. Martin mentioned the upcoming launch of two new kids networks in Asia and plans for an unspecified number of new channels in Latin America.

Asked about focus markets abroad, Martin said "our strategy is really to be in growth businesses in growth territories where we want to gain scale" and can grow profits. The company has the biggest scale in Latin America, where its TV networks revenue is approaching $1.5 billion, with Asia and Central and Eastern Europe also being key markets.

Discussing upcoming U.S. carriage renewals, Martin reiterated confidence that TW can grow its fee revenue. He said that TW has four of the top 15 cable networks in the U.S., giving it unique and broad bargaining power. Recent carriage deal renewals with two of the top 10 pay TV operators already secured the desired fee rate gains, he added.

Martin also said that subscription VOD revenue from digital distributors of TV content, such as Netflix and Amazon.com, also "feels like this will be a sustainable, very healthy business."

After Warner Bros. booked $350 million in SVOD revenue in 2012, more than half of that "automatically flows into 2013," the TW CFO said. In addition, TW has this year already unveiled new Amazon and Netflix deals and has had "constructive discussions" with them and emerging players, Martin said.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

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