Helen Sloan/courtesy of HBO
Time Warner's HBO broadcasts the popular "Game of Thrones" series.
Time Warner is just the latest cable network to cast a lukewarm forecast on the 2015 television advertising market as viewers shift to consuming content on digital devices and advertisers continue to follow the consumer trend to digital, or wait far later in the day to make their TV buying decisions.
Speaking on the company's Q4 earnings call, Time Warner chief financial officer Howard Averill said that advertising revenues at its Turner Broadcasting division - which houses CNN, TNT, TBS, and Cartoon Network, among brands - were down in the quarter and up just 1% for the year. Going forward, the company expects its total advertising revenues to be "about flat."
As AdAge points out, by comparison, Turner's advertising sales grew 5% in 2013.
Time Warner showed fewer Major League Baseball games this season compared with last, which had a big impact its sales of higher-priced ad inventory. There were bright spots, however: CNN grew ratings amongst adults between 25 and 54-years-old by 70% in January, Cartoon Network marked a double digit ratings increase "across key demographics" in the quarter, and Adult Swim also marked a strong performance.
Time Warner said advertising prices in scatter market - in which advertisers buy inventory much closer to the time - are up "mid to high single digits" over the upfront, where advertising is sold far ahead of time, in bigger chunks, and for higher rates. Volume "remains moderate," Time Warner said.
Time Warner isn't alone
That sluggish advertising trend is reflected in the wider TV market. Earlier this month 21st Century Fox cut its 2016 profit forecast due to the decline in broadcast television ratings and the impact of currency swings that are affecting the entire market.
A note released earlier this week from Nomura Research based on recent numbers from Nielsen found total live TV viewing in the US was down by 12.7% year over year across the networks of major media companies in January. The reason? Companies like Netflix, Amazon Instant Video and Hulu tempting away viewers from watching content in the traditional way.
That switch in behavior is resulting in a direct impact on the TV advertising market. Spend on TV advertising in the US dropped 2% year on year in the final quarter of 2014, Standard Media Index (which claims to pull 80% of US ad agency spend from the booking systems of five of the six global media holding groups, as well as some independent agencies) estimates.
How Time Warner plans to take on the digital titans
To combat the changing trends in ad buying, for the first time ever this year, Time Warner will hold one joint upfront across all its networks and digital platforms.
As Howard Averill, Time Warner's chief financial officer, explained: "Combining the reach and quality environment of TV with the analytics in targeting digital is the holy grail for advertisers and, if we do that successfully, we think we can take back share from digital competitors over time."
In addition, Time Warner plans to launch its own digital services to win the affection of "cord cutters" switching to the likes of Netflix, Hulu and Amazon Prime Instant Video. An HBO "over-the-top" service is due to launch later this year, a premium product with the aim of snagging "the low-hanging fruit of the 10 or so million broadband-only homes," according to HBO chairman and CEO Richard Plepler. Time Warner has also recently launched other multi-platform offerings like CNNGo, HBO GO, as well as partnering with companies like Snapchat for its Discover feature and with Dish's Sling TV service.
Overall, Time Warner reported a 9.7% dip in adjusted operating profit and a revenue fall of 1% to $7.53 billion in the three months to December. Performance highlights included Game of Thrones broadcaster HBO, which reported a 6.2% increase in revenue in the quarter, and Turner, which saw a 2.3% revenue lift in the period - both thanks to higher subscription and content revenue.
For the full year, total revenues increased 3% $27.4 billion, while adjusted operating profit fell 5.8% to $5.98 billion. The company forecast that adjusted profit from continue operations for 2015 will be between $4.60 to $4.70 per share.