M+E Connections

Time Warner’s decision to take a 10% equity stake in Hulu and provide content to the streaming video service “fits our strategy like a glove,” Time Warner CEO Jeff Bewkes said Aug. 3 during his company’s earnings call for the second quarter, ended June 30.

The company’s Hulu pact was announced concurrently with Time Warner’s earnings results. The investment in Hulu “reflects Time Warner’s continued commitment to supporting innovative digital services that allow consumers to access high-quality content however they want it across a variety of platforms,” Time Warner said in a news release.

As part of the deal, Time Warner said it will supply Hulu with content from across Turner’s various TV networks, including Adult Swim, Cartoon Network, CNN, TBS, TNT and Turner Classic Movies, both live and on-demand on Hulu’s new live-streaming/virtual multichannel video programming distributor (MVPD) service that is scheduled to launch early next year.

The Hulu pact will “increase our company’s exposure to the secular growth in over-the-top services and it will give Hulu more resources to offer consumers more shows and more choices, fostering competition and innovation amongst both SVOD services and among MVPD services,” Bewkes said on the call.

“Consumers clearly want innovative interfaces,” Bewkes went on to say, adding: “They want more robust on-demand capabilities and they expect a greater variety of content packages. And we want to support services that do just that.”

The pact with Hulu “leaves us free to continue to support fully” other traditional and broadband-delivered distribution platforms, he said. Time Warner will be “working closely with our existing MVPD partners and with existing and new over-the-top partners in bringing consumers more choice in how to access” the company’s content, he said.

“We expect there will be a number of additional virtual MVPDs that launch over the coming year and we think that the increase in choices available as a result of these new services will be great both for consumers” and Time Warner, he said.

The “structure and the nature “ of Time Warner’s virtual MVPD deal with Hulu were “similar” to those the company had with virtual MVPDs it was “already in business with,” including Dish’s Sling TV and Sony’s PlayStation Vue, Turner CEO John Martin said.

Coming to Hulu with just a 10% stake and no seat on its board — unlike existing Hulu joint owners Comcast, Disney and Fox — “reduces complications around governance,” Bewkes said.

Time Warner’s investment in Hulu was “in line with the company’s larger strategic goal to expand in-season stacking rights and to reinvest in the ad supported windows” of TV shows, Stifel Research analyst Benjamin Mogil said in a research note that was favorable to the pact.

Time Warner’s HBO Now OTT subscription VOD service had its best quarter to date in the second quarter, Bewkes also said on the call. Similar HBO services will launch later this year in unspecified markets outside the U.S., joining ones previously rolled out in the Nordic region and parts of Latin America, he said.

Turner, meanwhile, is in the process of launching an arthouse film SVOD service, FilmStruck, following the recent launches of SVOD services by Adult Swim in Canada and Esporte Interativo in Brazil, he said. The SVOD service that Warner launched in China with Chinese investment company Tencent recently passed 10 million subscribers, Bewkes said.

On the videogame front, Turner recently completed the first eSports tournament broadcast on TV, around the Valve game “Counter-Strike: Global Offensive.” Across the 10-week ELeague tournament, between online streaming service Twitch and TBS, there were almost 1 billion minutes of consumption, Martin said. It also brought “millions of new viewers” to TBS – many of them young males, he said, calling that age demographic “right down the strike zone of what we were hoping for.” Up next will be an ELeague tournament for the new game “Overwatch” from Blizzard Entertainment this fall, he said, adding that will be followed by a second “Counter-Strike” tournament.

Turner owns the ELeague eSports league with William Morris Endeavor Entertainment and thinks it is a “huge area of secular growth” for Time Warner, Martin said. “We absolutely intend to participate in a big way in this area, and we couldn’t be more pleased with how the first season proceeded,” he added.

Also in video games, the first title from Warner Bros. Interactive Entertainment using virtual reality (VR) is “Batman: Arkham VR,” which will be one of the launch titles in October for Sony’s PlayStation VR, Bewkes said.