Time Warner, the company behind cable channels like TNT or TBS Cartoon Network, announced that the rating for its domestic entertainment networks have fallen below what they were initially anticipating. Therefore they are considering reducing ad revenue for 2016, according to Reuters.
Like expected, the company’s shares were affected after this announcement was made, dropping with more than 10 percent on Wednesday. Time Warner isn’t the first company to announce this, as this August, Walt Disney, owner of ESPN and ABC made a similar one.
People are switching to online platforms
The main cause of these lower ratings is the increasing popularity of online streaming platforms, like Netflix and Hulu, as many users are switching from traditional TV to watching movies and shows online.
Also, cutting the ad revenue wasn’t the only measure taken by Time Warner, as they also decided to reduce the adjusted profit forecast for 2016, citing a strong dollar which wouldn’t meets the 2018 earnings forecast, of $8 per share.
Jeff Bewkes, the company’s chief executive officer is aware about consumers shifting to online platforms, so he considers providing more on-demand content as mandatory.
You need to keep up with the trends, otherwise you’re losing
“It’s critical that we push on the accelerator because every day it becomes clearer that the trends we anticipated are happening, and in some ways they are happening even faster than we expected,” he declared to analysts.
After reporting a better than expected profit and revenue for Q3 of 2015, thanks to the increased HBO subscription fees, and a rise in licensing revenue from Warner Bros, Time Warner’s share went down in earlier trading.
As for the predictions for 2016, Time Warner expects adjusted earning of $5.25/share, despite their initial prediction, close to $6. On the other side, analysts are pointing to $5.60. Finally, the total revenue went up with 5.1 percent, reaching $6.56 billion until September 30.
