Time Warner chairman and CEO Jeff Bewkes said AT&T’s pending $108.7 billion merger to buy his company will drive advanced advertising for every network, not just his own.
At the UBS Media and Entertainment conference in New York, Bewkes said that there is a big opportunity in advanced advertising on the VOD platform. And he said he hopes that the AT&T merger, which counts targeted advertising as a big reason for the pairing, will help drive acceptance.
“If you’re talking about VOD ads, it’s going to evolve differently,” Bewkes said. “In terms of load it probably should be less; it’s going to be taking the recent engagement and the tremendous loyalty it has. You need to get it targeted, you need to get it measured; it therefore can be more valuable and therefore it can be less interruptive, therefore people will watch through it. “We’ve been investing in that at Turner. We probably have the higher percentage of our ads in the more aggressive new advertising forms. We’re going to keep doing that. We hope the AT&T combination helps us with that. We hope it helps everybody. We want to foster competition in the ad business, which currently is getting fairly focused in two companies – Google and Facebook – and we think there is plenty of room for competition and therefore growth for us, so we’re going to go there. We’re here to help.”
Bewkes also gave a lengthy explanation as to why Time Warner still makes money on AT&T’s decision to price the HBO offering on its DirecTV Now over-the-top service at $5 per month, roughly one-third of the price other distributors charge for the service. Bewkes said that HBO still has a robust wholesale price – which he did not reveal – adding that charges to distributors vary based on the level of subscriber penetration for HBO service. So, a distributor that has 40% HBO penetration pays less than one with 20%, he said.
He added that offering HBO at a lower retail price is something Time Warner has wanted for years, but that distributors have tied other programming or services with flat price structures to the premium channel which has driven up charges.
“We’ve always wanted, which is why we had to launch [HBO] Now a few years ago, to make HBO in a more affordable price range,” Bewkes said. “We welcome distributors making aggressive price offerings for HBO.”
Bewkes also seemed to dispute recent reports that its standalone HBO OTT service, HBO Now, was having difficulty growing subscribers. When UBS media analyst Doug Mitchelson, who was interviewing Bewkes, mentioned he thought a recent estimate that HBO Now had about 1 million subscribers was low, Bewkes responded, “me too.”
“We didn’t hit the wall and we’re not building the wall,” Bewkes said.
Regarding its cable networks, Bewkes said recent affiliate renewals for its Turner networks were “very robust.” And he added that CNN is expected to build on the momentum of 2016 into next year through its mix of domestic and international news, digital offerings and strong original shows, like Anthony Bourdain Parts Unknown.
“That combination, which is a pretty wide mission for CNN, has worked great and that’s why we are doing so well in earnings and we’ll do even better next year,” Bewkes said.
