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Why Time Warner Continues to Be Optimistic about HBO

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HBO’s subscription revenue growth

Time Warner’s (TWX) HBO original programming, which includes series such as Game of Thrones, has so far been a success for the company. The company is continuing to aggressively expand its programming for HBO with new shows such as Westworld, Insecure, High Maintenance, and Divorce

Time Warner continues to be optimistic about HBO in 2017. The company stated on its 2016 earnings call that it expects HBO’s subscription revenue to rise in the high single digits this year.

The company further stated that considering the global demand for HBO’s content and an improvement in subscriber revenue trends, it expects HBO to be a key revenue driver in the medium to long term.

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Time Warner further indicated that a core driver of its rising subscription revenue has been the distribution of its programming through its affiliates and through OTT (over-the-top) services such as Amazon’s (AMZN) Instant Prime Video service. According to the company, it’s also observed an uptick in OTT subscriber growth, and it intends to tie up with more OTT services this year.

HBO’s 2016

Time Warner’s HBO had revenue of $5.9 billion, a rise of 5% year-over-year (or YoY), with operating income of $1.9 billion. The rise in HBO’s revenue was primarily driven by a rise in subscription revenue. HBO had subscription revenue of $5 billion in 2016, a rise of 5% YoY.

The rise in subscription revenue was mainly driven by the company’s affiliate deals in the United States and growth in its international subscription revenue. Time Warner makes up 0.37% of the SPDR S&P 500 ETF (SPY). SPY has 3.9% exposure to the computers sector.

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