O'Brien's TBS show draws broadcast ad rates

Turner has long pushed for ad parity with broadcast nets

NEW YORK -- Conan O'Brien's TBS late night show, which debuts in November, has seen "very strong" advertising demand and drawn ad rates "on parity with broadcast" TV in the upfront ad market, Time Warner chairman and CEO Jeff Bewkes told Wall Street Wednesday. It's the first time experts remember a cable show outside of sports and kids programming eaching pricing parity with broadcast content.

Bewkes' comments on TW's earnings conference call came after the media conglomerate reported a better-than-expected 7.3% second-quarter profit gain as the content giant brought in its highest revenue growth rate since the second quarter of 2008.

Brad Adgate, senior vp, research at media buying agency Horizon Media, told THR that while TW's cable network ad sales team was very aggressive on the O'Brien show, the high ad rates are "surprising" as marketers typically still pay less for cable shows. Turner has, however, long pushed for broadcast-like ad rates.

Linda Yaccarino, executive vp and COO of Turner Entertainment ad sales, told THR that investments in O'Brien, the NCAA tournament and "Big Bang Theory" are all aimed at pushing for content and ad parity with broadcast networks. "With the tremendous support of our ad partners, Conan O'Brien has become the first show to break through that barrier," she said. "After all, it's not the Conan Cable Show, but the Conan O'Brien Show."

While details on ad partners will only be unveiled closer to the Nov. 8 launch, she said "several major blue-chip advertisers from leading categories" have signed up for the show.

Experts say it can be difficult though to put a dollar value on single shows when advertisers buy a broader package of ads on various shows or networks under the umbrella of the same company. As such, the comments on the high ad rates for Conan could be seen partially as an ad rate negotiating tactic. 

Either way, O'Brien is expected to draw strong ratings and ad buys initially. Adgate doubts though that O'Brien will draw the same number of viewers on TBS longer-term that he used to get on NBC, which could lead to a decline in ad rates over time.

Yaccarino would only say that Turner's ratings guarantees are realistic and "very competitive" with other late night programs.

TW on Wednesday reported a quarterly profit of $562 million compared with $524 million in the year-ago period.

Revenue rose 8% to $6.4 billion. Advertising revenue jumped 11% - its biggest gain in almost six years - driven by a 14% increase at the firm's Turner networks.

Based on the stronger-than-expected results, the conglomerate raised its full-year growth guidance.

"Our investments in high-quality content across the company continue to pay off," said Bewkes.

Film revenue rose 8% thanks to stronger theatrical performances from the likes of "Clash of the Titans" and "Sex and the City 2," higher TV license fees and better video game results. But adjusted film operating profit declined 2% due to higher theatrical and TV film and advertising costs. Home video revenue was down 8% on sluggish sales and a special item that had boosted the year-ago results.

Management reiterated that the Warner Bros. film unit will post "very strong" results for the full year 2010. By pushing digital distribution, especially of home entertainment, and controlling costs TW hopes to keep improving film unit profitability, brass said,

At TW's TV networks unit, revenue rose 11% and operating income grew 14% as ad revenue rose and international expansion and higher sales of HBO original programs, such as "The Pacific" and "True Blood," contributed their part. TW lauded the ad gains at the Turner networks despite recent ratings challenges and highlighted that their upfront ad market haul was at the high end of the industry.

CFO John Martin said TW expects another strong ad growth performance in the current third quarter, even though he acknowledged it may be tough for the firm to maintain the strong momentum of the second quarter. Scatter, or current ad sales, market prices are still up more than 20% over upfront levels currently though, he said.

In a memo to TW staff, which THR obtained, Bewkes lauded his conglomerate's content-driven performance. "Warner Bros.' performance certainly highlights the quality and appeal of our content," he wrote in the memo entitled "We Are Gaining Momentum."

He also highlighted how well and naturally TW's units work together these days - something that always remained elusive at the much-maligned AOL-TW. Discussing the increasing collaboration, Bewkes said: "I think there's much of it at Time Warner than any other media company - growing from the natural affinities and points of contact among our businesses." Such cooperation becomes increasingly important "as platforms, windows and technologies continue to evolve," he argued.

Here is a look at further highlights from the conference call:
- Asked about the financial effect from recent agreements to push back the windows, in which Netflix and Redbox get their hands on TW DVDs for rentals, Bewkes said the 28 day delay has been "quite good," particularly for big titles, such as "The Blind Side" and "Sherlock Holmes." He said that his firm has seen "considerably higher" sales in weeks 2-4 for such titles. Plus, TW has seen films from other studios that don't use this windowing structure "appear to be underperforming," Bewkes said.

- Asked about the future of MGM, Bewkes said the studio seems to be moving away from a sales auction with some recent steps seeming "pretty inept." He highlighted that while TW made a bid - valued at $1.5 billion, it never had access to full financials to verify the studio was truly worth that bid.

- While he acknowledged the disappointing boxoffice performance of "Cats & Dogs: The Revenge of Kitty Galore," Bewkes said the success of "Inception" and TW's overall studio strength continue to make him bullish on the film unit's outlook.