Turner Broadcasting said it plans to jump into the direct-to-consumer business with a couple of products by the end of the year.
At a luncheon get together with reporters in New York on Wednesday, Turner CEO John Martin offered few details about the product. He said it might be an offshoot of one of the companies network or a brand extension aimed at superfan willing to pay for a subscription service.
CBS on Tuesday said that by the year 2020, it expected its over-the-top subscription products to generate $800 million in revenue, so this could mean real money.
Martin also expected Turner networks to be part of virtual MVPD services that could be launched this year. Turner is already on Sling TV and Sony’s Vue service, but he said a breakthrough will come when someone manages to combine a great user interface with great content.
Martin and Turner president David Levy said that there was nothing in Turner’s current distribution pacts with cable and satellite companies that prevents it from trying to serve cord-cutters, cord shavers and cord nevers in new ways. And Turner can afford to be in skinny bundles because four of its networks account for 85% of its distribution revenue, which means that if only those networks go in the bundle, Turner won’t take too much of a haircut.
During a bullish overview, Martin noted that Turner generated the majority of Time Warner’s profits and that at a time when many analysts are nervous about the ability of cable networks to grow distribution revenue, Turner will post gains in the low teens for this year and next year..
While Turner has seen total subs fall by about 1.5%, he said turners agreement with distributors have rate increases and minimum levels of carriage that will ensure rising revenues.
“I think we’re going to buck the trend,” Martin said.
Turner is also expecting an uptick on the advertising side.
“It’s going ot be a very, very strong upfront for the media business,” Levy said, with strong demand based on the high prices in the scatter market and some clinets deciding to shift some marketing dollars spent on digital last year back to TV.
Levy said that data would be a bigger topic in this year’s upfront. He said about 10% of Turner’s upfront conversations involved its data-driven ad products last year and that he expected that to go up to 30% to 40% this year.
“TV is acting more like digital. Digital is acting more like TV. The winner is going to be TV because of the quality of content and the reach TV generates,” he said.
Noting that competitors including NBCUniversal and Fox have also announced data products, Levy noted that it remains to be seen if media buying agencies have the resources to sort through all the data approaches being pitched.
Turner is also looking to reduce ad loads on some of its network. Three new original series on TNT are being produce with five minutes of extra content per hour. And truTV is making a big cut in ads and putting branded content during breaks.
Levy said Turner can make up the shortfall because in focus groups, consumers say they’ll watch more if there are fewer commercials. That would mean higher engagement and higher ratings for which clients would pay.
CORRECTION: An earlier version of this story misstated how much Turner expects distribution revenue to grow. The company says subscription revenue will accelerate into the low teens this year and be in similar territory next year.
