Time Warner Forecasts Wholesale Rev Growth, Higher TV Subscriber Fees

Although the multichannel TV universe in the U.S. has been stagnant over the last couple of years, Time Warner sees growth.

Speaking at a Goldman Sachs investor conference, Jeff Bewkes, chairman and CEO of Time Warner, says "the recession has slowed things down." He notes that growth, in better times, had been at 1% or 2% per year. There are now around 90 million to 95 million TV homes connected to a multichannel TV service. TW still plans "to have wholesale [revenue] growth."

Bewkes says Time Warner is a fraction of the total wholesale cost that multichannel program operators pay for TV networks. With upcoming increases in wholesale fees, he says those TV retailer operators "have got a lot of flexibility about where to put those charges."

Higher subscriber fees for TV networks will come from new deals -- especially for those that are deemed more valuable.

"Look at the top 40 channels," he says. "About 17% of TV viewing occurs outside of these 40 channels, and $7 billion [in affiliate fee/revenues] goes to those channels. Our wholesale charges are relatively modest." Bewkes says there will be a reallocation of money going to the channels that pull in more viewers.

TV advertising markets slowed in the third quarter because of the Olympics, he notes --although they have picked up a bit for the upcoming fourth quarter. "There is a little improvement there." But he says there is a long way to go, believing TV advertisers are waiting for new economic stimulus efforts in the U.S. and Europe to kick in.

He notes there continues to be a decline in DVD revenues -- but says new online products will convince consumers to buy. This includes new digital services from Flixster and new cloud-like, electronically connected DVD products, like Ultraviolet, which look to revive the business.

"The industry will continue to experiment with ways for electronic sell-through," he says, "so that ownership is worth something."

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