Time Warner Promises To Adapt To Cord Cutting With Fewer TV Ads, Gets Punished By Wall Street For It

from the (re)volution dept

Thu, Nov 12th 2015 6:33am — Karl Bode

So far the cable and broadcast industry has had a three pronged approach to the threat of cord cutting and the rise of Internet video. One, remain in stark denial about the changes in its sector, refusing anything more than the most superficial evolution (and if anybody notices, just use the word innovation a lot). Two, a relentless dedication to annoying its customers further at every turn, whether that's blocking ad skipping technology or inserting more ads than ever into every viewing hour. And three, a total refusal to ever, ever compete on price. Ingenious, right?

So it was interesting to see Time Warner admit last week that the company would need to make some changes if it hoped to appeal to younger generations, for many of whom traditional cable is a utterly foreign concept. According to Time Warner, the company says it's actually going to limit the number of ads shown on some of its networks:

"Time Warner’s TruTV is testing a new advertising model: It wants to charge sponsors more money by running fewer commercials. Starting in the fourth quarter of 2016, the network, which is devoted to comedic reality programming, will fill less of its time with advertising and promos and more of its air with actual programming. In all, TruTV should run just 10 minutes to 11 minutes of national commercials and promos, compared to 18 minutes to 19 minutes at present..As a result, episodes of shows that air under the new model could run as long as 25 minutes.

“We have a generation that has grown up with access to content that does not have commercials,” said Chris Linn, president and head of programming at TruTV, in an interview. “In order for us to remain relevant to them, we have to deliver the most premium experience possible.”

And while that's only half the battle, it's at least a step forward for an industry that's been comically in denial. Time Warner basically admitted the company needed to address the quality of its product and the delivery of it, accept that the existing TV cash cow is not immortal, and push harder into online streaming. But after Time Warner CEO Jeff Bewkes made the mistake of admitting this on the company's earnings conference call last week, near-sighted Wall Street was sent into absolute hysterics:

"Media stocks faltered during Time Warner's call with analysts to discuss its third-quarter earnings. Chief Executive Jeff Bewkes said his company -- which owns HBO, CNN, TBS, TNT and Warner Bros. -- expects adjusted earnings of about $5.25 a share next year, well below the $5.60 a share forecast by analysts.

One reason for the lower earnings, Bewkes said, was because the company is investing more in new programming for its streaming service, HBO Now, and other digital initiatives. He cited HBO's recent deals with Jon Stewart and "Sesame Street" as well as Turner Broadcasting System's plans to launch a new digital studio, Super Deluxe.

The problem is that offering a better experience is only half the battle. In the face of inexpensive streaming and skinny bundles, the cable and broadcast industry is also going to have to compete on price, something that cable operators and broadcasters alike have treated like the Bubonic plague. So far the cable industry hasn't quite realized that its precious cash cow is dead and current profits are unsustainable. And those that do have this revelation (and begin the much-needed process of adaptation) are punished by Wall Street's total and often painful obsession with the six inches in front of its collective nose.

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Filed Under: competition, cord cutting, tv, tv ads, wall street
Companies: time warner cable

40 Comments

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Anonymous Coward, 12 Nov 2015 @ 6:49am

Here's an idea - how about the content people charge less.
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That Anonymous Coward (profile), 12 Nov 2015 @ 6:59am

OMG WE MIGHT MAKE .35 LESS!! BURN THEM BURN THEM!!!!

Lets ignore the larger picture that marketshare is slipping, there is starting to be way better competition, and failing to adapt might lead to us only getting .35 at most if the behemoth fails.

Cordcutting doesn't exist, everyone will always get our content how we have always delivered it, speaking of which how is our 16mm film sales division doing?
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Anonymous Coward, 12 Nov 2015 @ 7:09am

Re:
I always love watching public companies like this. As soon as they go public, any idea of being a good company building for the future goes right out the door and the next quarter's numbers are all that matters.
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Anonymous Coward, 12 Nov 2015 @ 7:15am

YouTube is the future
I personally enjoy watching 10 to 20 minute videos on YouTube as much or more than watching most hour long shows on TV/cable. The way I see it, the TV industry is being disrupted and now the tools to create video content is in the hands of the masses. I would not be surprised that in addition to the one man shows we have now on YouTube, that small production companies made up of friends and classmates will form and start putting out TV type series and movies. Will they be polished? Not at first, but they will eventually. And if the story is good, they don't have to be as polished.

Then we won't have short seasons, we will have year round programming. We won't have to wait until Tuesday night a 8:00 pm to watch a show, they will be posted at any time. We won't have to wait a week between shows, they can show up multiple times a week or even a day.

Frankly I am surprised this isn't happening already. Maybe I should be the first? :)
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Violynne (profile), 12 Nov 2015 @ 7:19am

There's a fantastic older movie (I've yet to see come out on Bluray) called "Other People's Money". Stars Danny DeVito and Penelope Ann Miller in a show where Danny's character sees a small cable making company's stock high and decides to "cash out" but forcing the company to sell.

The closing argument he makes is awesome, and pretty honest in its delivery.

The movie ends with the company shuttering, only to be revived in changing from making cables to airbag mesh nets.

Bring us to 2015 and those stockholders in cable companies remind me of this movie. They'll hem and haw, refusing to see the world changing, while demanding business don't change in the hope their stock value only increases.

Money makes people do stupid things.
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That One Guy (profile), 12 Nov 2015 @ 7:22am

What great programming...
Starting in the fourth quarter of 2016, the network, which is devoted to comedic reality programming, will fill less of its time with advertising and promos and more of its air with actual programming. In all, TruTV should run just 10 minutes to 11 minutes of national commercials and promos, compared to 18 minutes to 19 minutes at present..As a result, episodes of shows that air under the new model could run as long as 25 minutes.

Wow, let me say, reading stuff like this, it really drives home the kind of high-quality programming you miss out by not caring one bit about tv. I mean really, I can't imagine how much more rich my life would be watching such brilliant shows two-thirds of the time, with the remaining one-third being taken up by what I'm sure is equally high-quality advertisements.

Truly, my life is so flat and dull without such brilliance to light it up, I just don't know how I've managed to survive this long without it.
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jupiterkansas (profile), 12 Nov 2015 @ 7:24am

Re: YouTube is the future
Never mind that most of those one hour shows are just 10 minute videos stretched out to fill a timeslot.
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Ninja (profile), 12 Nov 2015 @ 7:30am

Re: What great programming...
Tell me about it. I say it's still 11 minutes too much advertisement considering I am PAYING to watch.
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Anonymous Anonymous Coward, 12 Nov 2015 @ 7:41am

Over Some Rainbow
If it wasn't for the fact that it would hit Q4 bonuses (Christmas is coming) I would suggest that all cable companies follow suit. Take the hit now thereby setting expectations for the stock market for when the shit really hits the fan.
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Anonymous Coward, 12 Nov 2015 @ 7:42am

Another platitude hoping something will stick to the wall to make it work without actually doing much. They said they would give less advertisement time on their shows. There's nothing here about in show advertisement. So expect some actor to turn over in bed and show you a Pepsi or Coke can.

At this point in life, I don't plan to ever buy another tv. I've been without one for many, many, years now and honestly the peace of mind that came with it is priceless. It will take far more than this to equal the experience I now have of totally commercialess, view on demand, entertainment without cost. One that gives you the ability to pause, back up, or fast forward without effort.

Broadcasters have poisoned their well and it will take some serious efforts to ever bring me back. Frankly I don't think they have it in them to do so.
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Anonymous Coward, 12 Nov 2015 @ 7:52am

Wall Street always punishes the good actions
So Wall Street 'panics' about this. Par for the course. For the past 2 decades or so every company that laid off employees was rewarded with a higher stock price.

To this layman's thinking that's retarded. A reduced work force means that the company does not have enough business or has seen a reduction in business. Otherwise the company will take longer to provide it's goods or services than they could with the prior workforce.
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ECA (profile), 12 Nov 2015 @ 7:58am

What the???
"for many of whom traditional cable is a utterly foreign concept."

Its funny, that I have to explain 'Broadcast TV' to people..
Im even setting up my 3 Antenna and Booster setup for OLDER folks who know what it is.. Even added an Aux. Antenna to a Dish system, for better reception(the dish SUCKS for local channels.)

I think its funny, that SAT and CABLE give local channels, and most people dont even know THEY ARE LOCAL AND FREE..

Its fun setting up Antennas, and explaining to people WHAT they have to do to get a good signal..
Living in Farming areas, we have over 20 channels, and I know Large cities have TONS more..
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Anonymous Coward, 12 Nov 2015 @ 8:02am

bdj
When I first signed up for cable in the 1970s, it was pitched as high-quality and ad-free. Today they play ads between the shows, on top of the shows, and they sell my info to 'partners' who then send me more ads.

Look, *I* am their customer and as such, I want to buy content not commercials. However, the cable companies also have advertisers as customers who are paying them to ruin my experience.

I'm getting old and I haven't had cable for nearly 12 years so it's not just the younger folks who are avoiding them.

I now pay Netflix for ad-free content. I'm certain that Netflix will someday cave in to the tempting pile of money advertisers have to offer. The day that I see a commercial on Netflix will be the day I cancel service.
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Anonymous Coward, 12 Nov 2015 @ 8:04am

Re: What great programming...
Oh, come now. TruTV is a bastion of thoughtful, humorous, intelligent programming. Let's see now...hmmm...Cruise With The Jokers...alright maybe not that...Adam Ruins Everything...not so much...Impractical Jokers...seems repetitive...World's Dumbest Criminals...meh...Bungling Boneheads, Fools on Parade, Silly Behavior, You've Got Fail, Road Spill, Psychotic Not-Line, Silly Surprises, Masters of Disasters, Out of Fashion, Show Me The Funny, Viral Vidiots, World Wide Whackos...hmmm.

Does anyone who is not a mentally retarded subhuman primate with serious brain damage actually watch this shit?
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Anonymous Coward, 12 Nov 2015 @ 8:05am

Re: What the???
Hey, I'm someone who doesn't know how to do the antenna/booster/sat thing, but would very much like to. Can you post a link or two that might help me? -thanks
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Ninja (profile), 12 Nov 2015 @ 8:05am

Stocks, the stock market, they are a curse on humanity. It's a small fraction of companies and individuals that own the majority of the market and have computers responsible for the majority of the transactions. This is actually what causes some major fluctuations we've been seeing lately.

But I digress. If you or I own a company, we will want it to succeed even if it means getting less money today to get tons of money in 10 years. Because we own it, we probably built it, we want it to do well, to be liked, to be the best in what we do. Enter a group of faceless investors that couldn't care less if your company dies as long as they got the profit and one can understand why most open companies act the way they do. Their anonymous owners hidden behind the stocks want profit and want it now. Who cares if we need to kill some puppies and kittens, said 'investors' won't see it or if they do they don't care.

We don't really need huge companies. We need better, ethic companies regardless of their size. And it seems stocks need to go if we want it.
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Anonymous Coward, 12 Nov 2015 @ 8:09am

Interesting times. Zero cost copy has wall street nervous. Highly regulated government granted monopolies are their only solution to this current information revolution. ('shrink the state', 'deregulate' etc... being their hypocritical cries for everything they aren't short term profiting from).

Heaven forbid actual progress takes place. Short term profits at any cost. Sorta poetic though.

Fights hard for monopoly status... gets it... gets stuck in it by financial sector... can't compete with reality even just a little.
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Anonymous Coward, 12 Nov 2015 @ 8:14am

Re:
That's not .35 less that they'll be making. That's .35 less per share. With the number of shares TW has outstanding, that works out to millions of dollars less on the whole. I think it actually works out to just under $100,000,000 less profit.

Of course that's partly because they're spending that money on things that are intended to strengthen the company, instead of giving it back to investors. Their revenue is in the multi-billion dollar range as well, so it's a relatively small amount to be spending.
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Anonymous Coward, 12 Nov 2015 @ 8:16am

Wall Street always wants the opposite of what's best for them
If you want to find a company that's doing a good job of investing long term, look at who Wall Street punishes and invest in them.
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Anonymous Coward, 12 Nov 2015 @ 8:27am

Re: bdj
I now pay Netflix for ad-free content. I'm certain that Netflix will someday cave in to the tempting pile of money advertisers have to offer. The day that I see a commercial on Netflix will be the day I cancel service.
If they do stream adds, they will lose my service too.
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Anonymous Coward, 12 Nov 2015 @ 8:30am

It's been a double dipping industry for ever first they charge the consumer high connection prices then they toss in commercials..they need to follow premium channels like hbo's model , suscribers are already paying the high prices.
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me@me.net, 12 Nov 2015 @ 8:44am

they dont get it
Let me help:

People dont want bundles. AND

The content you have is on Hulu, etc, and it's STILL CRAP.

Theres stuff as good/bad on youtube.
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PRMan, 12 Nov 2015 @ 8:54am

Re: Re: What great programming...
I've tried watching World's Dumbest on occasion if there's nothing else on. It CAN be funny. But then I drown in commercials and turn it off and do something on my laptop.
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Anonymous Coward, 12 Nov 2015 @ 9:08am

Re: Re: What great programming...
I've always figured that most cable tv channels are either money-laundering businesses or shell corporations for the CIA.
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jupiterkansas (profile), 12 Nov 2015 @ 9:20am

Re: bdj
Netflix has started running promos for their original content. I consider those commercials. Thankfully Hulu offered commercial free streaming at about the same time, so I made the switch.
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Great_Scott (profile), 12 Nov 2015 @ 9:22am

Re: Wall Street always punishes the good actions
Don't forget that employees "let go" in various ways have no income and therefore don't purchase things, which affects all companies.

Could this be a downward spiral that suppresses consumer demand? Nah....
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Anonymous Coward, 12 Nov 2015 @ 9:33am

Re:
If you or I own a company, we will want it to succeed even if it means getting less money today to get tons of money in 10 years.
Even worse, there are plenty of people who only want to be self-sustaining because they enjoy doing what they do. At this point they'd probably be diagnosed as mentally ill.
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Anonymous Coward, 12 Nov 2015 @ 10:42am

Re:
Stocks, the stock market, they are a curse on humanity.

Their is nothing wrong with stocks, or companies offering a service to link sellers and buyers of stocks. Two things have caused problems, the market men concentrated control over buying and selling, giving them more knowledge of the market that the buyers and sellers. Also because they make money on transfers of stocks between buyers and sellers, they encourage stock trading as the way for investors to make money from stocks, rather than investing in stocks in the long term for an income.
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Anonymous Coward, 12 Nov 2015 @ 11:19am

Re: YouTube is the future
This >is
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Zonker, 12 Nov 2015 @ 12:32pm

Near-sighted Wall Street
Wall Street is so near-sighted it is legally blind.
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Anonymous Coward, 12 Nov 2015 @ 1:29pm

Re: YouTube is the future
Your post could have been written 5-10 years ago... Today, the popular YouTube channels are often staffed with a production crew.

For every CommunityChannel or PewtiePie, you've got a Good Mythical Morning or Wong Fu Productions. Then you've got things like Field Day.

You've also got things like Veritasium, where a polished one-man-show has been picked up by non-internet-media: Derek got a bit part in one of the Hunger Games movies, and then got to do the Uranium: Twisting the Dragon's Tail documentary.

Listen to the sound biscuit podcasts Rhett & Link have done with a LOT of the YouTube personalities -- you'll see that things have already changed, and that the speed at which new content is produced is often limited by things other than the budget/staff they have available.

I see the future more as federated channels, where each channel picks a time slot to fill for a specific viewership. More like what MinutePhysics and MinuteEarth started to do.

And, of course, you've got things like EllenTube already, which replays cable syndicated content on a YouTube channel.

So welcome to yesterday; this IS already happening.
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Anonymous Coward, 12 Nov 2015 @ 1:45pm

Re: Re: What the???
http://www.bestbuy.com/site/tv-video-accessories/tv-antennas/abcat0107004.c?id=abcat0107004

It's hardly secret.

I grew up with TV connected to untwisted pair going up to the roof. The secondary TV had rabbit ears. Eventually we got a UHF/VHF booster (little directional mini dish).

Basically, all you need is a Digital TV (with built-in or attached DTV tuner), and an antenna of the correct geometry. Extra circuits to cancel noise/boost signal are optional, especially now that everything's gone digital.
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Anonymous Coward, 12 Nov 2015 @ 2:09pm

Re: Re: bdj
You do know that Hulu offers "commercial free streaming*", right?

That * is important. There are a number of shows where they're contractually obligated to show ads even on the commercial-free feeds.

So Netflix is still more ad-free than Hulu, depending on what you actually watch.
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jupiterkansas (profile), 12 Nov 2015 @ 2:10pm

Re: Re: Re: bdj
Since I'm mainly watching their Criterion collection it's not an issue for me.
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Anonymous Coward, 12 Nov 2015 @ 5:17pm

Re: Re: Re: What the???
I grew up with TV antennae that rotated via a TV set located wired control so that optimum performance was determined by the result on the TV. It was in color too. What's your point?
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Anonymous Coward, 12 Nov 2015 @ 8:19pm

As a result, episodes of shows that air under the new model could run as long as 25 minutes

Jeebus! Shows can be 2 1/2 to 3 minutes longer! How revolutionary!
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Morgan Wick (profile), 13 Nov 2015 @ 3:44pm

Re: Re:
What, then, is the way to fix that?
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GEMont (profile), 13 Nov 2015 @ 6:21pm

No brainer.
The deal was simple.

TV was Free to the public, because the commercials paid for it.

Now that we must pay for TV, the commercials no longer have any right to be there at all.

Either make TV free, and keep the commercials, or charge for TV and remove all commercials, completely.

or...

Any channels that have commercials become free and any commercial free channels are paid for by the public.

Simple.

---
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That Anonymous Coward (profile), 14 Nov 2015 @ 3:40pm

Re: Re:
For someone holding 100 shares that is $35.
While it might be a giant pile of money across all of the stock, the "impact" on the average investor isn't that huge.
The impact of the company bleeding subscriptions might move that decimal to the left for the next earnings projection.
The "market" punishing a company for trying to stay profitable to make sure they get a couple extra hundred today at the expense of the future is stupid.
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Jared (profile), 17 Nov 2015 @ 8:44pm

cutcordinfo.com is a site that is trying to provide information on cord cutting. You can leave a comment or contact the admin if you feel as though something should be added or you disagree with something.
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