Why Were Time Warner’s HBO Subscription Revenues Up in 2015?



HBO revenues

Time Warner’s (TWX) HBO had revenues of $5.6 billion in fiscal 2015, a rise of 4% over fiscal 2014. Adjusted operating income was $1.9 billion in fiscal 2015, up by 5% year-over-year. Revenues increased 6% year-over-year in 4Q15 to $1.4 billion with adjusted operating income that remained flat in 4Q15 at $393 million. The growth in revenues was primarily driven by an increase in subscription revenues for HBO.

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Subscription revenues

HBO’s subscription revenues increased by 3% in fiscal 4Q15 and by 4% in 2015. Subscription revenues in the United States were up by mid single digits in both fiscal 4Q15 and 2015. The company stated at its fiscal 4Q15 earnings call that the revenue contribution of HBO Now to the rise in subscription revenues is increasing. The company expects it to rise further in fiscal 2016.

Besides Time Warner, Viacom (VIAB) and its Nickelodeon channel and CBS (CBS) are other media companies that have launched their own direct-to-consumer offerings to compete with pure-play OTT (over-the-top) operators such as Netflix (NFLX).

In fiscal 2015, HBO (including HBO Now) and Cinemax had an addition of 2.7 million subscribers in the United States. The company expects HBO subscription revenue growth to be in high single digits in the near future.

Content revenue

HBO’s content revenue grew by 20% in 4Q15 and 6% in fiscal 2015, driven by a growth in content licensing revenues in international markets.

Time Warner makes up 0.29% of the iShares S&P 500 Index (IVV). For an investor interested in exposure to computers, IVV has 3.9% exposure to the sector.


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