Broadband Cable Association of Pennsylvania

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February 6, 2014

There's been no Netflix effect on HBO.

Time Warner Chief Executive Jeff Bewkes, who used to mock Netflix as the "Albanian army" coming to take over the world, said its success doesn't hurt HBO either in terms of revenue or eyeballs. Talking to investors and analysts about its fourth-quarter and year-end earnings, Bewkes noted that HBO and its sister channel Cinemax added 2 million subscribers last year. Overall HBO is in 130 million homes around the globe compared to 44 million for Netflix. Households that have Netflix and HBO, Bewkes said, tend to watch more of each other's service than households that don't.

While Time Warner has never been shy about noting how powerful HBO is, the company is now breaking out the financial performance for its premium channel unit instead of combining the results with its Turner Broadcasting holdings. "HBO remains in a league of its own," Bewkes said. For 2013, HBO had profits of almost $1.8 billion on revenue of $4.9 billion. While Netflix had revenue of $4.3 billion last year, its profit was $228 million. For the quarter, HBO's revenue was up 6% to $1.3 billion, thanks to increased subscription fees. Operating income, however, dropped 4% to $413 million due to higher programming costs and the consolidation of HBO Asia and HBO Nordic.

Overall, for the fourth quarter Time Warner had profits of $983 million, or $1.15 per share, compared to $1.1 billion, or $1.17 per share for the same quarter in 2012. The 12% decline was due to larger programming costs and $105 million in asset impairments, the majority of which was related to the soon-to-be-spun-off publishing unit Time Inc. Revenue for the quarter was up 5% to $8.6 billion. Thanks to the hit movies "Gravity" and "The Hobbit: The Desolation of Smaug," and the continued strength of its television production arm, Warner Bros. saw revenue grow by 7% to almost $4 billion. Operating income was up 4% to $573 million. Los Angeles Times

The Federal Communications Commission will complete changes this spring in the federal program to connect schools and libraries to high-speed Internet service and separately will consider increasing the tax paid by consumers or phone companies to finance the effort, the agency's chairman, Tom Wheeler, said Wednesday.

In an address as part of Digital Learning Day, a national program focused on online education, Mr. Wheeler said that any increase in the tax would be preceded by a restructuring of how the current $2.4 billion annual program spends its money. Only about half of the program, known as E-rate, currently pays for broadband connections; some of it pays for outdated technologies like pagers and dial-up connections. "We have identified opportunities for greater productivity within the program, including significant improvements to the way funds are deployed," Mr. Wheeler said at an event at the Library of Congress. Following the restructuring, he added: "Should it be necessary to increase the permanent funding levels for the E-rate program, we will do what is appropriate."

The Obama administration has set the goal of connecting 99 percent of all students to high-speed broadband - of at least 100 megabits per second, more than five times the speed of the average home broadband connection - within the next five years. As previously reported, the F.C.C. will double, to $2 billion, the spending on high-speed Internet connections in schools and libraries in each of the next two years. That increase will come primarily from the use of funds collected in previous years but not yet spent.

E-rate is part of the Universal Service Fund, a program that pays to connect rural areas, low-income people and schools and libraries to advanced telecommunications services. It is financed by an approximately 15 percent tax on a portion of consumers' home and wireless phone bills. The tax applies only to a small slice of phone charges, so the tax totals a few dollars per month for most consumers. "The current E-rate program is burdensome, slow and not always focused on the right goals," Mr. Wheeler said. "As managers of the program, the F.C.C. must improve the speed and effectiveness with which E-rate is run." New York Times

Aereo Inc., the online-television company that's battling broadcasters in the Supreme Court, reopened its service to New York subscribers after regaining enough capacity to handle demand. People who were on a waiting list are being notified first before the company reopens its website for sign-ups, Virginia Lam, a spokeswoman, said in a statement today. The company had stopped accepting new users in New York about a week ago. Aereo uses thousands of dime-sized antennas to obtain broadcast signals without paying fees to networks such as CBS Corp. and 21st Century Fox Inc., drawing their ire. The company, backed by Barry Diller, operates in nine other U.S. cities, with plans to expand after it completed a $34 million round of funding last month. It hasn't said how many subscribers it has in New York or elsewhere.

The Supreme Court agreed earlier this month to hear an appeal by media companies including CBS, Fox, Walt Disney Co.'s ABC and Comcast Corp.'s NBCUniversal, which contend Aereo violates their copyrights. Unlike Aereo, cable and satellite carriers pay the broadcasters for the right to distribute their programming, even though it's available for free over the air through an antenna. Fox is optimistic that the Supreme Court will rule in its favor this year, the company said today on a conference call with analysts. Reuters

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