Linear TV Still Top Priority For Warner Bros. Discovery, Analyst Says

Although the new Warner Bros. Discovery is aggressively pursuing streaming business, linear TV will continue to be the dominant and profitable business for years to come, says one media analyst.

Linear TV networks under the new company -- including TNT, TBS, CNN, and now Discovery Channel, HGTV, Food Network, and Investigation Discovery -- now comprise an estimated 49% of the company revenue, looking at the combined 2021 financial data of the companies, according to MoffettNathanson Research.

“Because of the importance of pay TV to Warner Bros. Discovery, we expect the combined Discovery and Turner cable networks portfolio to try to protect [emphasis added] the linear ecosystem and be a source of a greater amount of time spent in the pay TV bundle,” the media business analysts write in a recent report.



Although all U.S. cable TV networks continue to see declining “time viewed” among persons two years and older -- 30% from 2015 to 2021 -- Discovery and Turner TV networks have been able to maintain their share of time -- at 18% and 12%, respectively.

Together the two big cable TV network groups had a 30% share of all U.S. cable TV networks in 2021, in terms of time viewed.

But that pie is much smaller overall. For its part, over the period from 2015 to 2021, Turner networks fell 9% in time viewed basis on compound annual growth rate (CAGA); Discovery linear TV networks declined 6%.

Live sports is one effort that the new company will continue to focus on going forward. Sports bring in premium advertising spending from marketers.

One of the new company's major programming costs and benefits has been with Turner's networks continuing relationship with the NBA. Turner's nine-year deal for its TNT/TBS networks is set to expire in 2024.

MoffettNathanson estimates that on the low end of projections, a new NBA contract could double in price to around $21.2 billion over nine years, from a $10.5 billion price tag in its current deal

“We use this base case as an illustrative example to show how important the NBA renewal is to WBD [Warner Bros. Discovery] and Turner's future EBITDA [earnings before interest taxes depreciation and amortization growth," the authors write.

Reports suggest the new NBA deal -- for both Turner and ESPN --- could in fact be higher, with a tripling of rights fees.

It’s not just the NBA. Live sports TV rights fees have risen dramatically -- including the NFL.

The downside is that the NBA might look to extend its deals to digital media companies -- as the likes of the NFL, and most recently, Major League Baseball has done, possibly to the detriment of Turner networks.

“There is a realistic possibility that Turner ends up losing the package altogether, which could have negative ramifications on the company's affiliate fee and advertising growth.”

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