Time Warner chairman and CEO Jeff Bewkes said that distributors looking to get tough on retransmission-consent demands from broadcasters and higher affiliate fees from cable networks will likely focus on niche networks, rather than established channels.
On a conference call with analysts to discuss third-quarter results, Bewkes said that he is not worried about the changing dynamic, as some networks like Fox, CBS and ABC are beginning to ask for retrans cash outside of station groups.
"We think the big must-have, big reach networks will gain bargaining leverage in the coming years," Bewkes said on the call. "They [distributors] are essentially competing with ever more distribution choices -- telcos, cable, satellite and broadband -- and all of those all need strong, identifiable brands. If you have the strong and lead brands in those categories with a lot of reach, you're going to see the leverage go up. If the issue is whether an attempt, long-waited for by broadcasters, to move to some retransmission consent is going to be increasing rather than weakening competition for strong cable nets, I would vote with the cable networks, not the broadcasters. I would just cite the record low share for broadcast networks, which is down in the mid 20s."
Bewkes also seemed unconcerned about the premise that distributors would play hardball with cable networks to keep down carriage fees.
"It may be possible for distributors to do some efficiencies in their program buying to the weaker networks," Bewkes said. "But what I think you'll see is a bigger separation between the strong branded networks and some of the niche weaker ones that were frankly carried by momentum, [or] by their ownership by broadcasting companies that were essentially porting retransmission from broadcast over to some associated cable network."
Time Warner's own cable networks -- including CNN, TNT and Home Box Office -- reported strong growth in the third quarter, but couldn't overcome declines at the media giant's AOL, publishing and filmed entertainment units.
Total revenue at Time Warner was down 6% to $7.1 billion in the quarter, and adjusted operating income before depreciation and amortization fell 9% $1.8 billion.
The AOL unit saw the biggest declines -- revenue was down 23.2% to $777 million and AOIBDA fell 40% to $239 million in the period.
At filmed entertainment, revenue fell 3.5% and AOIBDA rose slightly (1%) to $385 million, while the publishing unit saw an 18.25% revenue dip to $914 million and a 42.3% plunge in AOIBDA to $139 million.
Those declines were too much for the cable networks to erase. Cable revenue was up a healthy 5.2% to $2.87 billion and AOIBDA rose 8.7% to $1.1 billion.