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CFO: Warner ‘Aggressively’ Transitioning From Packaged Media

9 Jun, 2010 By: Erik Gruenwedel

Time Warner Inc. CFO John Martin June 9 said the studio segment generates 10% of the media company’s profit in large part due to its proactive stance toward digital entertainment, including video-on-demand (VOD).

“We believe the transition from physical [DVD/Blu-ray Disc] to digital is going to be very good for us,” Martin told attendees at an investor event in New York.

Time Warner’s filmed entertainment division includes Warner Home Video.

Martin downplayed previous comments attributed to NBC Universal CEO Jeff Zucker, who characterized the migration of entertainment to the Internet as trading analog dollars for digital pennies.

“We don’t share that view,” he said.

The executive said Time Warner has actively sought to drive its businesses toward digital rather than have the format spearhead the transformation. He said allowing consumers to get content through expanded channels and do business with more retailers (such as online aggregators) via revised windows, improves pricing and reduces distribution costs.

He said there is secular uplift as it relates to margins and returns on investment, most notably in home entertainment. Warner Bros. would continue to exert its market share influence in determining how the new business models evolve, and insuring that they are additive rather than cannibalistic, Martin said.

He cited ongoing efforts to drive higher-margin video-on-demand (VOD) and the establishment of revised distribution windows (including 28-day delays of packaged media to kiosks and Netflix) and related home entertainment digital options.

“In home entertainment, we are aggressively transitioning from physical to digital, which on a discreet transaction-by-transaction basis has higher margins,” Martin said. “That could lead to growth.”

He added that 3D movies represented a new means of “enhancing” the overall consumer experience, underscored by the public’s willingness to pay a premium for the format.

“It’s not an accident, that Warner Bros.’ film studio has been the No. 1 at the domestic box office for eight of the past nine years,” Martin said.

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