M+E Daily
Time Warner CFO: Digital Holds Potential for Higher Margins, but Market Transition Will Take Time
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Time Warner will encourage home entertainment consumers to purchasing more digital media goods over physical discs because digital transactions represent “better” earnings prospects for the company “on a like-for-like basis,” according to John Martin, the media conglomerate’s chief financial officer.
“Our strategy,” Martin said at a Morgan Stanley investor conference March 2, “is to try to push usage, through pricing and windowing, to the highest-margin channels.”
Those channels could include so-called premium VOD, which Warner Bros. and other studios plan to launch in partnership with cable, satellite and Internet service providers later this year; and digital services marketed directly by Warner units, such as HBO’s Internet VOD service, HBO Go. Martin’s remarks followed HBO Go unveiling online access to a library of some 1,400 movies and original series for its pay-TV subscribers.
Martin added that Warner Bros.’ windowing strategy with DVD rental services such as Netflix and Redbox has brought an approximate 15% sales lift “for comparable films once the window was instituted versus before the window was instituted.
“We’re convinced,” he said, that the studio’s institution of a window “was helpful” and “the right thing to do.” Warner executives noted during the company’s earnings call in February that the studio would be evaluating the terms of its window agreements. “But [we] would certainly rather have the window than not have the window,” Martin said.
For Time Warner, whose business units span television production and videogame development, the home entertainment industry’s digital transition is a long-term growth prospect. In 2011, Martin offered, increases in cable network affiliate fees, among other sectors, pose more immediate and assured revenue growth opportunities.
“It’s going to take some time [for home entertainment markets] to shake out,” he said, “but I think if we successfully execute and can transition from physical to digital, as an industry, it [will present] a nice opportunity for us.”
