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HBO Max Launch Could Be Undermined by Turner Linear Networks, Analyst Says

Turner's linear networks, including TNT, are facing a five-year renewal cycle with pay TV operators, with ratings down and parent company WarnerMedia in the process of launching HBO Max. (Image credit: WarnerMedia)

While HBO is the focus of WarnerMedia’s big upcoming streaming launch, it’s actually Turner Networks that really drives the AT&T media division’s profits, according to MoffettNathanson analyst Craig Moffett. 

And as WarnerMedia gets ready to launch HBO Max in April, it’s facing a flurry of potentially fraught carriage renewal deals with pay TV operators for Turner. 

“HBO Mad is, after all, the initiate AT&T has called the ‘future of the company’ — [but] the center of gravity of WarnerMedia is not HBO … it is Turner,” Moffett wrote in a note to investors today. He said that Turner’s cable channels, which include TNT, TBS, CNN and Cartoon Network, accounted for 53% of WarnerMedia’s earnings before interest and taxes in 2019. 

“For better or for worse, WarnerMedia’s future, at least for the next four or five years, depends more on Turner than it does on HBO Max,” Moffett added. “And here’s the problem: Turner hasn’t signed a major rental since 2014/15, when they did a flurry of deals with Dish, Comcast, Charter/TWC and Cox. Assuming five-years renewal cycles, all fo those deals will now be coming up for negotiation.”

As Moffett added, the “timing of these renewals couldn’t be worse” for WarnerMedia, as it tries to sustain core linear revenue streams while simultaneously transitioning its business to an SVOD model. 

“Turner’s two core cable networks, TNT and TBS, have been two of the worst performing networks in all of cable over the last five years,” Moffett wrote. “They have lost a staggering number of viewers, their length of tune has declined (a telling sign of falling engagement), and their ratings have absolutely cratered.