An increase in viewership in HBO has helped it rake in more profits. Additionally, it has also taken a 10% stake in Hulu.
The owner of CNN and Cartoon Network, Time Warner Inc. has raised its profit forecast for 2016-2017. Additionally, it has also disclosed that it has taken a 10% stake in TV streaming service Hulu.
With the news hitting the market, shares of Time Warner surged by 3.2% in premarket trading. The company’s reporting of higher than expected quarterly profit can be attributed to its increased intake of viewers for its premium Home Box office network.
This news comes at a time when Time Warner is facing increased competition from video streaming services, particularly Amazon Prime and Netflix, as young viewers are increasingly ditching traditional cable TV services and are opting for their online equivalent.
Time Warner’s Turner unit has been trying to tap into this market by offering viewers complete seasons of its shows, including, “Public Morals” and “Angie Tribeca” for “binge-watching”.
Last year it even launched its own streaming service, “HBO Now”.
After having acquired the 10% stake in Hulu, its Turner Classic Movies and shows on its Turner’s networks will be available live and on-demand on Hulu’s new live-streaming service, which is slated to be launched early next year.
“The Hulu investment is not a surprise,” said Matthew Harrigan, an analyst at Wunderlich Securities.
He went on to add, “They want to ensure that the Turner networks have the broadest possible distribution without really compromising the traditional cable, satellite and telco channels.”
Time Warner did not disclose the financial terms of its 10% stake in Hulu.
With this move it joins, Comcast Corp, Walt Disney Co and 21st Century Fox Inc. as a shareholder in Hulu.
Recode has reported, citing sources familiar with the matter at hand, that Time Warner has paid $580 million for the 10% stake in Hulu. At that price, Hulu will have a valuation of about $6 billion.
Time Warner has reported that it expects an adjusted profit in the range of $5.35-$5.45 per share this year. This is up from its previous forecast of $5.30-$5.40.
According to Thomson Reuters I/B/E/S, analysts were expecting its full-year earnings to provide $5.39 per share.
HBO’s revenues, home to the popular TV series “Game of Thrones”, rose by 2%.
Excluding items, Time Warner earned $1.29 per share, compared with the average analyst estimate of $1.16. However, its revenue have fallen by 5.3% to $6.95 billion from $7.35 billion, mostly due to a decline in its Warner Bros movie studio.
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