Time Warner has cut its 2016 profit forecast and hinted it may delay releasing shows to streaming services such as Netflix that pose a threat to its business.
The HBO, CNN and Turner owner’s revenue increased by 5% to $6.6bn, but its earnings outlook of $5.25 per share for 2016 fell short of expectations for $5.60.
It blamed greater investment in programming and foreign exchange problems for the forecast shortfall.
In a conference call with analysts and investors on Wednesday, Time Warner chief executive Jeff Bewkes said: “Programming remains by far the most significant area of investment for the company. As you all know, we have plans to invest aggressively in content in 2016 and beyond.
“And an increasing part of that investment will be directed towards brands and IP that we think will resonate with consumers on new platforms. HBO’s investments in John Stewart, Bill Simmons, Sesame Street and its expanded Vice relationship are all great examples.”
He added: “While we are living in the golden age of television programming, for many consumers, the television viewing experience is stuck in the Bronze Age. So we’re stepping up our investment and providing the best possible consumer experiences. For instance, we plan to increase our investments in new digital products and infrastructure so that we can meet consumer demand for video outside traditional TV and compete effectively across platforms.
“That includes new broadband delivered initiatives targeted at millennials such as HBO Now, CNN’s startup Great Big Story, and TBS’s new digital studio, Super Deluxe.”
Bewkes also hinted that the company is considering delaying offering online services such Netflix and Amazon Prime its shows several years after they first air – or even withholding them altogether. This would mean more older episodes are available on-demand to traditional cable and satellite customers, making such offerings more attractive.
Time Warner is focused on “delivering even more value to consumers, especially those who subscribe to the traditional bundle,” Bewkes said.
“Given ongoing shifts in consumer behaviour, we think it’s important to provide even more on-demand content as part of our network offerings. As a result, we’re evaluating whether to retain our rights for a longer period of time and forgo or delay certain content licensing.”
Analyst Anthony DiClemente of Nomura Securities said Time Warner is reacting to the growth of Netflix as a power in the TV industry.
“Some of the media executives are looking at Netflix as a digital distributor who has gained too much power,” he said. “They are thinking, ‘Look, maybe we should keep our most valuable content inside the traditional pay-TV ecosystem, which is the golden goose.”
Time Warner shares fell $5.10, or 6.6%, to close at $72.20 on Wednesday. Its shares have fallen more than 15% this year.
Shares in 21st Century Fox, which reported on Wednesday that its revenue had fallen by 6% in the first quarter of 2016, fell by 5.2%.
