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Time Warner is committed to the traditional pay TV system, while also exploring new opportunities, chairman and CEO Jeff Bewkes said on the entertainment conglomerate’s third-quarter earnings conference call on Wednesday.
The call featured much talk about HBO’s planned online-only video service, but also addressed a carriage dispute between the firm’s Turner unit and Dish. TW executives expressed confusion and some frustration over what they said was the satellite TV giant’s “aggressive” stance.
Asked about the Dish dispute, Turner CEO John Martin said: “We honestly have no idea what Dish was talking about yesterday.” He added that the company worked “diligently” on a deal. He said usually the firm wouldn’t comment if Dish chairman Charlie Ergen hadn’t done so on Tuesday in what Martin called “antagonistic” comments that had downplayed the importance of Turner’s networks. “We disagree with virtually everything he said as it related to the importance of our product,” Martin said.
He added that Dish weeks ago had agreed to Turner’s carriage proposals, and he had felt there was common ground on most issues. Turner had even agreed to make its networks available on Dish’s planned Internet-based pay TV service, Martin said. Amid the dispute, he said it was “unclear” if the company would still make its channels available on it.
“To us, it is unclear exactly what the dispute with Dish is,” Martin said. “While there clearly were more deal points to get done, they were not of the type of nature that would result in networks going dark…We were told by them that we were taken down because we wouldn’t move an expiration date later in the year. It was expiration date for networks that aren’t even up yet.”
The comments came after the company reported better-than-expected quarterly results and raised its full-year earnings growth forecast.
CFO Howard Averill said fourth-quarter Turner advertising revenue will be flat due to fewer sports playoff games, a strong dollar and a carriage dispute with Dish. Without these factors, the firm would have seen return to growth in the current quarter, he said. Averill said if Turner and Dish don’t settle, the 2014 financial forecast will come in at the lower end of the range. He added that the firm is “working hard” to resolve the dispute.
Bewkes said that the company was focused on going after “the large and growing opportunity” in the global video content space by streamlining the company and letting its collaborative unit heads go after traditional and new business opportunities. He said TW was the “best-positioned” media company to take advantage of this.
He also emphasized TW’s “commitment to a strong multi-channel eco-system” after recent news that HBO would launch an online-only video service. The company at the same time “can’t ignore the opportunity beyond the eco-system” and will target it, he said, while vowing to work very closely with current pay TV partners.
In a rare occurrence, the call’s Q&A portion also included the chiefs of TW’s three units: Warner Bros. boss Kevin Tsujihara, HBO head Richard Plepler and Martin. Bewkes said they were on the call to help answer any follow-up questions after the company’s investor day last month.
Plepler discussed HBO’s online-only plan, reemphasizing that the focus will be on collaborating with pay TV partners. “We want to lean in with them,” he said. “I’ve talked to all of our distributors.” Plepler said he sees “nothing but upside” for all parties.
Plepler reiterated that he wasn’t abandoning existing pay TV relationships. “This is not binary,” he said. He wants to initially go after 70 million pay TV homes that do not get HBO right now, he reiterated. Plus, “there’s 4-5 million [broadband-only homes] that we can also get with our partners,” he added.
Plepler said he has talked to the top executives at NBCUniversal and Comcast, and both sides feel they will remain good business partners. NBCU boss Steve Burke recently said he had been surprised by HBO’s decision to launch an online-only service and said it would have a tough time with it.
Martin on Wednesday said that a Turner charge in the third quarter was for acquired programming that no longer fits Turner networks, including The Mentalist and a number of shows from Tyler Perry, such as House of Pain. “We need to be more selective” about acquired programs to be distinctive, Martin said.
“He has always been a champion of high-quality programming,” Martin said about the hiring of Kevin Reilly as head of TBS and TNT. “We’re really, really thrilled.” Plepler added that Reilly enjoys a “stellar” reputation in Hollywood, and Plepler got positive email feedback on the hire. Warner Bros. has had a “fantastic” relationship with him, added Tsujihara.
Meanwhile, HBO is seeing “very healthy” U.S. subscriber growth and is on track for its best domestic subscriber year in almost two decades.
Warner Bros. will take $100 million in added charges in the fourth quarter on its job cuts. He said excluding those charges, Warner is on track for a record year in terms of profitability. Averill said the company feels the film unit can grow for the foreseeable future at attractive levels.
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