Time Warner Anticipates Strong Q4 Cable Ad Growth

Although the third quarter hit many TV networks with less advertising money due to the NBC's Summer Olympics, which took ad money out of the market, Time Warner believes that much will change in the coming months.

Speaking at an investor conference this week, John Martin, chief financial and administration officer of Time Warner, said: "We have been seeing a very strong scatter market; Q4 [fourth quarter 2012] is going to be very healthy."

This would be in contrast to the lackluster scatter market of a year ago, in the fourth quarter of 2011, when pricing was slightly up with low single-digit percentage gains, versus the rocketing upfront selling period in the summer of 2011, which witnessed high 12% to 17% and more pricing gains.

The upfront market in 2012 was a more modest affair -- with pricing hikes generally lower, growing 5% to 9% versus the year before.

In addition to the Olympics, Time Warner was somewhat negatively affected in the period by its Major League Baseball and Nascar programming, when it came to less TV advertising, says Martin. Soft ratings at CNN also contributed to weakness. "It's the one reason we are not going to be posting any meaningful [advertising] growth in the third quarter," he says.

Time Warner says its cable networks will be undergoing some big negotiations next year when it comes to affiliate contracts. "We are going to have our busiest rate renewal period in years," says Martin. Pulling in some $4 billion a year in subscription fees, Martin anticipates Time Warner's cable networks -- which include TNT, TBS, HBO and CNN in the U.S. -- will add to their coffers, seeing double-digit percentage hikes per year from 2013 to 2016.

Concerning revenues from new subscription video-on-demand services like Netflix and Amazon, Martin also expects revenues to climb at Time Warner -- now pulling in around $250 million a year (not including money from the CW, of which Time Warner is a 50-50 partner with CBS Corp).

Right now, typical SVOD product from Time Warner -- as for other media content owners -- comes from its library films and TV shows, hour-long programming that can't get a strong traditional TV station syndication window, as well as "broken" TV series -- those series that are cancelled before amassing enough episodes for traditional after-market airings.

Still, there could be promise with other growth. "Over time, it could prove to be a syndication window for original [programming] of basic cable," he says. "There really isn't a syndication market for basic cable."

Although Time Warner has been a big proponent of TV Everywhere -- its effort to give consumers access to TV and other content through new digital devices, like tablets, and services -- consumers have yet to use the product substantially.

"Most TV viewers don't know what it is," says Martin. "There needs to be much broader content... The user interface has to be easy and measured."  To get wider usage, Time Warner believes TV Everywhere needs to be on TV sets -- where new smart TVs offer an array of on-screen apps for consumers to access.

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