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Turner Broadcasting is going to double the amount of money it spends on original programming for TNT and TBS by the end of 2018 from the current $500 million a year to over $1 billion, according to John Martin, Turner’s chairman and CEO.
During an interview at a Wells Fargo investment conference Wednesday, Martin was bullish on the entire Turner business model. He said they expect “double digital affiliate revenue growth through 2018” by getting higher rates from cable and satellite operators in return for more and better original shows.
Martin also predicted an agreement will be reached with Dish Network, which currently has most Turner networks blacked out, if only because they want Turner’s strong sports shows from the NBA, football and baseball, and others.
He did express anger at CEO Charlie Ergen and Dish over how they have handled the public face of the talks.
“Without getting into all the details,” said Martin, “we were both surprised and disappointed deeply that Dish decided to pull off a number of our networks; and we were surprised at the aggressive tone that was taken on the [Dish] earnings call.”
Martin also shrugged off recent ratings problems at TNT, TBS and CNN. He said aside from ratings problem caused by errors at Nielsen, “we actually think video consumption is flat or up a little. … We strongly believe at least half of the reported ratings declines this year are attributable to the inclusion of broadband in homes in the overall universe.”
“We think the remaining half,” added Martin, “is attributed to viewing moving outside the traditional measurement window which is happening because of more robust video on demand offerings; and viewership moving to digital, iPad devices, smart phones and so forth. Most of which is not measured.”
Despite that, he said Turner is “monetizing“ a lot of viewing that Nielsen isn’t measuring, using other measurement methods including data directly from cable operators.
Martin does not think Netflix or other SVOD services are hurting their viewership because “it’s just not big enough if you do the math,” although he admitted it is a “challenge.”
Martin is also not concerned that HBO’s planned over the top offering will cannibalize HBO or others. He said that it is intended to reach broadband-only customers and those who don’t currently have HBO, and for distribution in countries around the world where HBO is not available.
Martin said he expects Turner to learn from the HBO OTT service but there is no plans at present to offer a similar product.
He pointed to the success of original programming on TNT and TBS, including this past summer when they had six of the top 10 originals on cable, including Murder in the First and The Last Ship.
Martin said that should improve even more when Kevin Reilly takes over as what he called chief creative officer: “Kevin is coming home to cable where he was so successful. He is going to have absolutely the right sensibility,” in choosing new shows.
Martin said that Turner is now working more closely with Warner Bros., a sister company, especially in international expansion and in children’s programming.
“This is the new Time Warner,” said Martin. “With the next generation of leadership now in place, and with the companies being smaller and more closely aligned, we actually believe working together can actually move the needle on the dial.”
The shows from Warner’s come with expanded rights that allow Turner to exploit those shows on TV everywhere, digital, mobile, video on demand and other emerging platforms.
“Any show with Warner’s,” said Martin, “we can stack all the seasons of the shows on demand, making it easy for consumers to see them. We already have evidence from our originals over the summer that stacked shows do better and have higher delivery of audiences.”
In the kids business, Turner and Warner’s are working together to expand the Boomerang Channel, which is family friendly, as well as roll out Adult Swim and Cartoon Network to more international markets.
At present, Martin said the Turner kids business has revenue of about $1.3 billion a year, of which less than $100 million comes from consumer product licensing and merchandising. “Getting behind a handful of global franchises,” added Martin, “we can exploit on our networks, working with retailers, giving them a longer lead time, having a multi-year pipeline similar to the way movie slates get crafted. … I think there is an opportunity in the not-too-distant future… to ramp up. It should be hundreds of millions a year in revenue that were just leaving on the table right now.”
Martin defended the high cost of the recent long-term agreement to continue carrying NBA basketball. He said a decision was made at the highest levels of Time Warner that the deal with the NBA was a good move.
“The visibility of great sports programing we have I think meaningfully de-risks our plans going forward,” added Martin. “The new deal provides all we had under the old deal … and also adds 12 additional games in the regular season, additional rights for Bleacher Report which is our digital sports destination … and we got additional activation opportunities in and around league events. That all should add revenue and bring us closer together [with the NBA] in partnership.”
He also praised what is being done at CNN. “CNN is making investments in originals,” said Martin. “The top five shows on CNN right now are original programs. I’m really proud of what Jeff Zucker and his team have done there in terms of selecting shows to put on the air because they are very high quality, very appealing and perfectly permissible with in the trusted CNN brand.”
Martin said Turner has an advantage right now in the size and scope of its programs and global audience but that could go away in an ever more competitive world.
“We need to take advantage of our scale advantage while we have a scale advantage,” said Martin. “While scale doesn’t guarantee success, it certainly guarantees you are going to have a seat at the table when you’re in the creative community and you are looking for the best projects with the best creative executive.”
“Given the arms race in original programing happening right now,” said Martin, “we need to step up our game in terms of magnitude of original programing we put on our networks.”
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