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Warner Bros Chief: Studio “Aggressively” Working On Premium VOD Deals

Deadline logo Deadline 2/8/2017 David Lieberman
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Warner Bros is “making a lot of progress” and “aggressively working with exhibitors” in its effort to create a premium VOD window — to offer new movies to home viewers during the 90-day period when theaters typically want exclusivity — studio chief Kevin Tsujihara told analysts this morning.

“The middle market in the theatrical business has become extremely tough,” especially with adult dramas that “we’re having problems with,” he said in a call to discuss Time Warner’s Q4 earnings. Offering those movies earlier to home viewers is “a big opportunity.”

Negotiations with theater owners involve “models that will grow the market rather than cannibalize the market,” he adds.

If there’s no change, then “they’re going to go to the pirated versions,” Tsujihara says. “This is very high on our list, and it has the potential to change some of the economics” of films.

Up to now exhibitors have resisted efforts to encroach on the window when they have new films to themselves.

Tsujihara added that he sees opportunities for Warner Bros to keep growing after second-best year in global box office revenues.

“We still believe there’s growth in the theatrical business,” he says.

He’s also bullish about television, even though “the growth won’t occur primarily in broadcasting, where we’ve been No. 1 for a long time.” He sees opportunities at premium networks, basic cable, and digital platforms.

The games business is “lumpy,” but he adds that “we can create a more sustainable pipeline as we get more to scale” — including with gains in mobile.

And he still sees a “big opportunity in China.”

Time Warner told analysts that it expects “healthy growth in adjusted operating income” at the studio this year.

Across the company, it expects adjusted operating income to grow by a high single digit percentage.

Also in the call, CEO Jeff Bewkes said that HBO’s streaming service, HBO Now, “surpassed 2 million domestic over-the-top subscribers.”

HBO chief Richard Plepler says that this is three times the number the company reported at the end of 2015. “That shows not only the robust demand for HBO but the opportunity we have out there, not only in the traditional ecosystem but outside of it.”

It was an important point as the company warned that there’ll be a lag in HBO sub growth in the first half of this year.

“Finishing the affiliate cycle has taken longer than anticipated, and we’re still in the midst of renewing some deals,” CFO Howard Averill said. As a result, “we do not expect sequential improvement in subscription revenue growth” in the current quarter. But that will improve “as the year progresses, especially in the second half of 2017.”

Specifically, he forecast high-single-digit growth in subscription revenue for the year.

Bewkes calls the growth of live streaming services such as DirecTV Now and the upcoming one from Hulu “a very healthy development.” They should “invigorate consumer interest everywhere” in TV programming. “That’s fueling increases in production spending across the network industry.”

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