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Time Warner CEO Jeffrey Bewkes on Wednesday said he sees upside to his company’s digital licensing revenue despite Netflix’s more selective approach and expects CNN to build momentum under new boss Jeff Zucker.
On the entertainment conglomerate’s first-quarter earnings call, he also touted his conglomerate’s planned publishing spin-off, the strength of Warner Bros. and recent legal victories related to the Superman character that his company will feature in a new movie this year.
The film, Man of Steel, “is a real opportunity for us to relaunch the Superman franchise,” Bewkes told analysts. The recent favorable legal rulings will allow the company to be “more aggressive in developing our future plans for Superman,” which he said he hopes to share soon.
Asked about the risk for TW of Netflix’s recent decision to be more selective about its content deals, Bewkes and CFO John Martin were confident. “We don’t really see that” as a risk, Martin said. “We’ve got the best shows. Demand will go up.” And Bewkes said: “We think it’s a good trend for us. We’re in the cat-bird seat.”
Saying that TW is in active negotiations with “all major players” in online video, Bewkes reminded analysts that the firm made over $350 million in digital licensing revenue in 2012, excluding a CW deal. This year, TW feels “very good” and “may well grow” that revenue, he said. But he emphasized that total digital licensing revenue accounts for only 3 percent of total film and TV revenue at his company.
Bewkes also touted the earnings strength of Warner Bros., highlighting that the disappointing performance of Jack the Giant Slayer didn’t hurt the film unit too much in the first quarter. And Martin reiterated that Warner profits would be “at least as good if not better than last year” in 2013.
Discussing HBO, Bewkes said it has been on a creative roll thanks to such hits as Game of Thrones. He once again shot down suggestions that HBO could launch a broadband-only service in the U.S. any time soon as it is doing in the Nordics. “We would do it if it was in our best economic interest,” he said, but added that the U.S. target market is not big enough. Instead, HBO is working with pay TV firms to expand its reach in “mutually beneficial ways,” he said..
Asked about the outlook for CNN, he said the news network has been working on being more competitive in the morning hours. It can’t simply focus on drawing ratings from elections and wars, so must continue to deepen its offers, he said. Bewkes argued there was “great upside” if CNN manages to get people to stay “a little longer than just for the headlines.” Plus, he lauded CNN for its digital growth, which he said “ought to get more attention.”
Discussing the planned spin-off of the Time Inc. publishing unit by year’s end, Bewkes said the world’s largest magazine company will end up having “much more strategic, financial and operational flexibility” and end up doing better on its own, similarly to how AOL and Time Warner Cable have done well since their spin-offs. The benefits of the spin “substantially outweigh” Time Inc.’s strategic links to other TW businesses, he said.
The spin will make TW “the leading pure-play video content company” with the largest TV networks group, biggest TV production business, largest film studio and 90 percent of profits from the broader TV eco-system. “We think that’s a very good place to be” given that ad rates, affiliate fees and digital revenue are all growing, he said.
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