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Time Warner’s Turner Inks Deal for DC Movies

Time Warner’s film and TV empires are getting a little cozier. Turner will be the basic cable home for DC Entertainment theatrical titles, Time Warner CEO Jeff Bewkes revealed during Tuesday morning’s earnings call. Bewkes didn’t name specific films, but the DC movie slate covers recent heavy hitters like “Suicide Squad” and the upcoming “Justice League” franchise.

The DC deal comes as Turner is beefing up its movie catalogue in a big way. In September, Turner closed a deal with Disney for the rights to the “Star Wars” films, including “Star Wars: The Force Awakens” and “Rogue One: A Star Wars Story.” That blockbuster deal, with an estimated value of at least $250 million, came after a 2014 agreement between the two for the rights to five Marvel movies, including Marvel’s “Avengers: Age of Ultron” and “Captain America: Civil War.” Turner has also acquired the TV rights to the “Hunger Games” franchise.

The DC subsidiary of Time Warner is a big contributor to the company’s bottom line, Bewkes said, with TV revenues for its 10 series now exceeding $1 billion. Five of those series air on The CW, Warner Bros.’ joint venture with CBS Corp.

Time Warner beat expectations on its third quarter earnings, but on the big subject of discussion Tuesday was the impending merger with AT&T. Bewkes and his lieutenants faced a grilling from analysts about everything from HBO subscriber numbers to FCC review of the deal, starting with how the company, famed for its culture of encouraging creatives, would keep that culture intact. Bewkes’ response? “First of all, I’m not going anywhere, and will be here going into the closing and quite a long time after,” he said, reiterating that all of the top executives at Time Warner’s subsidiaries would also be sticking around.

Other notes from the call:

  • HBO CEO Richard Plepler declined to give specific subscriber numbers for standalone offering HBO Now, but said they “couldn’t be more pleased” with the product’s performance, and promised accelerating growth in HBO Now and HBO subs in the fourth quarter and through 2017. Part of that growth might come from a distribution pact HBO inked with AT&T over the summer, which could lead to HBO being bundled in with AT&T wireless services. In February 2016, Bewkes said HBO Now had 800,000 subscribers.
  • HBO is set to spend $2.2 billion on content. When an analyst compared that to Netflix’s current budget of $6 billion for content, Plepler responded with, “More isn’t better, better is better.”
  • Turner’s 10% stake in Hulu, and its deal to be included in Hulu’s forthcoming live streaming TV package, won’t be affected by the AT&T-Time Warner merger.
  • Turner CEO John Martin said his segment is still in the early stages of, essentially, reinventing TV’s ad model. The Turner networks have seen improved commercial ratings for their less frequent ad pods and higher customer satisfaction, he said. The deal with AT&T will give Turner’s advanced TV advertising initiatives more data to work with, further enabling more targeted advertising that may cost advertisers more, but is far more efficient.
  • Time Warner’s legal team is currently attempting to see what, if any, of its licenses would have to be transferred to AT&T for AT&T to continue operating specific Time Warner assets after the merger. The nature of these license transfers is what will dictate FCC jurisdiction, but all the same, chief legal officer Paul Cappuccio doesn’t see them being a problem. “We’ll do whatever the law requires,” he said, adding that the company doesn’t have licenses material to the actual conduct of the business that AT&T would need.

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