Time Warner Buys 10% Stake in Hulu--Update
August 03 2016 - 8:33AM
Dow Jones News
By Lisa Beilfuss
Time Warner Inc. said Wednesday that it agreed to buy a 10%
stake in video service Hulu, a move that comes as traditional cable
companies struggle with viewers increasingly cut the cord and as
Hulu prepares to launch a new live-streaming service.
In addition, Time Warner also reported better-than-expected
second-quarter earnings and lifted its profit forecast for the
year, though profit and revenue fell from a year earlier, thanks to
slowing revenue growth in its HBO business and box office
weakness.
Time Warner didn't disclose the terms of the Hulu deal. In
November, The Wall Street Journal reported
In November, The Wall Street Journal reported talks about Time
Warner becoming an equal stakeholder in Hulu alongside Walt Disney
Co., 21st Century Fox Inc. and Comcast Corp. The Journal reported
then that such a deal would likely involve the current owners, who
own one-third each, drawing down their stakes to 25%.
Time Warner said Wednesday that its channels -- including TNT,
TBS, CNN, Cartoon Network and Turner Classic Movies -- will be
available live and on-demand on Hulu's new live-streaming service,
set to launch early next year. Hulu's new service, confirmed in
May, has threatened to further undercut traditional cable providers
by competing with their inexpensive "skinny" TV bundles.
"The investment in Hulu reflects Time Warner's continued
commitment to supporting innovative digital services that allow
consumers to access high-quality content however they want it
across a variety of platforms, " Time Warner said Wednesday.
The New York-based Time Warner -- owner of the Warner Bros. film
studio and cable channels HBO, TNT and CNN -- has been grappling
with subscriber declines as more people cut the cable cord and opt
for online streaming. In an effort to stem the tide, Time Warner
last year launched HBO Now, its stand-alone streaming service for
the channel featuring popular shows such as Game of Thrones.
21st Century Fox and News Corp, which owns The Wall Street
Journal, share common ownership.
The investment is the latest acknowledgment that cord-cutting is
accelerating. TV companies have been trying to reassure investors
that declines in pay-TV subscribers would continue at a manageable
pace. According to data from eMarketer late last year, the number
of pay-TV households will drop at a quickening rate for at least
the next four years, reaching a 1.4% decline in 2019, eMarketer
estimates. By that year, eMarketer estimates that almost 23% of
U.S. households won't pay for traditional TV.
Along with the Hulu news, Time Warner also logged
better-than-anticipated results in its latest quarter, prompting
the company to push up its full-year guidance.
Still, revenue fell 5.4% from a year earlier. The decline was
largely due to weakness in the company's Warner Bros. business,
where there has been a lack of Blockbusters. At the same time,
growth in HBO slowed sharply during the quarter, rising just 2%
after having climbed 7.7% in the first quarter. Turner's
performance -- revenue increased 6.5% as election coverage at CNN
and interest in the NBA playoffs drew more advertising dollars --
helped support the overall results.
In all, Time Warner reported a profit of $952 million, down from
$971 million a year earlier. On a per-share basis, the company
earned or $1.20 a share, up from $1.16 and boosted by a lower share
count. Excluding an impairment charge, among other items, per-share
profit rose to $1.29 from $1.25.
Revenue declined to $7 billion from $7.35 billion.
Analysts had expected adjusted earnings of $1.16 a share on
$7.05 billion in sales, according to Thomson Reuters.
For the year, Time Warner now expects to post $5.35 to $5.45 in
adjusted earnings per share, up from its earlier range of $5.30 to
$5.40.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
August 03, 2016 08:18 ET (12:18 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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