Media companies are banking on the prospect that tech firms will continue to pay up for digital rights to their programmes, despite recent warnings from Netflix that it would become choosier in its deals for traditional television content.
“With people consuming more and more video all the time, the key to success is pretty simple. If you keep creating the best content, you will keep getting paid better and better as technology improves,” said Les Moonves, chief executive of CBS.
Jeff Bewkes, chief executive of Time Warner, echoed that sentiment, saying his company is in an enviable position with its top-tier programming on networks such as HBO becoming more valuable as tech firms become more selective in striking content deals. “We think we’re in the catbird seat from that point of view with all of the [subscription video on demand] buyers,” he said.
The comments came as a slew of media companies, including Comcast, Viacom, CBS and Time Warner, reported a mixed bag of quarterly earnings on Wednesday.
Comcast reported a 17 per cent jump in net income, with more expensive rates offsetting a larger-than-expected drop in people paying for video subscriptions. Time Warner reported a 23 per cent increase in net profit, with growth in its television group making up for declines in its film and publishing divisions.
Viacom’s net earnings plunged 18 per cent, but the company reported increases in both ad and affiliate revenues. CBS reported an 18 per cent increase in net income from continuing operations, fuelled by gains in ad revenues from tent pole events including the Super Bowl as well as a boost in streaming revenues.
Media stocks have been lifted this year in large part by a resilient traditional television business that has showed little evidence of people abandoning their cable and satellite video subscriptions to watch programmes via the internet.
At the same time, new revenues from syndicating or selling content via digital services have helped prop up the business. At Viacom, for instance, digital licensing revenues have been a consistent bright spot for the past several quarters amid a challenging advertising market. CBS said that its deals with Amazon and Netflix led to 19 per cent growth in streaming revenues during the quarter.
But there is uncertainty on how long it can last. Just last week Netflix said it was increasingly focusing on original production rather than broad content deals with other media companies. The company also said that it would let its bulk content licensing deal with Viacom expire.
“As we continue to focus on exclusive and curated content, our willingness to pay for non-exclusive, bulk content deals declines,” Reed Hasting, Netflix’s chief executive, said at the time. Netflix said its deal with Viacom would be allowed to expire.
Viacom said that it is in discussions with several parties, including Netflix, regarding the digital distribution of its content both on an exclusive and non-exclusive basis. It said there is increased competition for its content from a range of companies. “We continue to see the digital distribution arena as a growing opportunity and one that will be complementary to what we do,” Philippe Dauman, Viacom’s chief executive said in a conference call on Wednesday. “It’s just growing the pie over time.”
Licensing revenues will become all the more important for Time Warner as it proceeds with the planned spin-off of its Time Inc and IPC magazine businesses by the end of 2013. That will leave 90 per cent of its profits coming from TV networks such as CNN and HBO, or production such as Warner Bros’ TV studio, Mr Bewkes said.
Falling subscriptions cut Time Inc revenues from $773m to $737m in the quarter, however, as the division fell to a $9m operating loss from a $39m operating profit a year earlier after $53m of restructuring costs.