Time Warner Management Presents at Morgan Stanley 2013 Technology Media & Telecom Conference (Transcript)

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Time Warner Inc. (TWX) Morgan Stanley 2013 Technology Media & Telecom Conference Call November 21, 2013 6:00 AM ET

Executives

John Martin – Chief Financial and Administrative Officer

Analysts

Ben Swinburne – Morgan Stanley

Ben Swinburne – Morgan Stanley

All right. Okay. Good afternoon everybody. I’m Ben Swinburne, Morgan Stanley’s Media Analyst, U.S. Media Analyst and we’re thrilled to have back at the conference, Time Warner. Sitting to my left is John Martin. John is the CFO, Chief Financial and Administrative Officer has been since 2005. Over the last four years under John and Jeff Bewkes’s leadership, Time Warner has increased earnings over 20% per year, generated $11 billion of free cash and returned over $15 billion of capital to shareholders. Effective January 1, John will be the CEO of Time Warner’s Turner Division, Network Division. So to some extent this is a sendoff for the conference circuit. So John thanks for coming back to Barcelona and being here with us.

John Martin

No, thanks, happy to be here. Thanks for having us.

Ben Swinburne – Morgan Stanley

Maybe we can start out at a high level. Talk about your outlook for the company over the next couple of years, what got you excited across the Time Warner portfolio?

John Martin

It’s great and good afternoon everybody. Thank you for your interest in our company. Yes, let’s talk about the next few years; I think before we talk about the next few years I’d be remissified if I didn’t mention that, we are completing another really strong year at the company in 2013. I think we’ll end the year, it will be a record year at our networks divisions with a little bit of luck given the strength at our studio business over the last six months, could even be a record of Warner Brothers this year. That coupled with an accelerated amount of capital that we’ve been using to exercise share repurchases. We feel good about delivering another year of really strong EPS growth in and around mid-teens.

And that completes as you said we’ve gone through five or six year run of EPS growth that has been around mid-teens. So we feel really good about that and so that’s great but that’s the past and so the questions is what do we’re going to do to keep that going because that is really the goal and the objective of the company and its management. So starting little bit the big picture and then I’ll drove down on to some key themes, a little bit of the big picture is we see growing demand for high quality popular content, the type of content that we spend most of our efforts trying to make. And what’s driving that increase in demand is really two themes, it’s technology and the way that is transforming consumption of video content and the second thing is – has been the consistent opening up of international markets to companies like ours. And we think that Time Warner has the brands, the management know how and the scale to be able to take advantage of those global trends and continue to deliver attractive economics and attractive growth.

So I want to just quickly touch on four items that I think are going to influence the company’s performance over the next few years and then I suspect would probably even drill down into them. But the first is we fully intend to monetize the meaningful amount of investments that we’ve been making over a series of years in programming at our Cable Networks Group and Ben I know you are aware of this, but sometime ago we had said that for the three year period 2014, 2015 and 2016 our intention at our Turner Domestic Broadcasting Networks which is roughly about $4 billion of affiliate revenue. Those are the revenues that we derived from the distributors. We intend to accelerate that revenue growth so that – over that three year period on a compound annual basis it should reach double-digits which would be a meaningful acceleration as compared to what it has been recently.

In addition, we also think we’re at the early stages and we’re hopeful and optimistic that our HBO Group which has about $4 billion of subscription revenues is going to begin to be able to grow at a faster rate than it has been. So theme one I would say would be affiliate rate monetization. The second theme is we have to capitalize on the global trends that I mentioned a little bit earlier by creating the very best content. And we’ve got a film and television studio that generally leads its industry in each year and so starting with Warner Brothers where roughly half of its profits come from television or television production.

Warner Brothers is consistently creating and fostering the best creative environment for the very best creators, writers, directors, producers to come and make terrific television projects and work for our studio and it’s evidenced by the fact that in this year’s broadcast season Warner Brothers has 31 shows on the air which I think is an all-time record for the industry – for Warner’s.

And it has growth opportunities in traditional syndication, in subscription video on-demand increasingly creating original shows for cable networks, cable networks that historically may not have done originals and developing increasing capabilities at international local production. On the film side where Warner’s generally is number one or number two every year at the Global Box Office we are completing another very successful year this year. And we’ve got to also keep that going by developing high profile event films, developing franchises, we just recently signed a new arrangement with J.K. Rowling where she is going to take us back to her world of witches and wizards and we’re really excited about the creative project that might come out of that. For anybody who like the Dark Knight or Man of Steel which was the reboot of the Superman franchise. In 2015 we’re going to have the two play against one another for the first time on screen and Dark Man versus Superman.

And so we feel good about our continuing ability to do that. So the second one is just to recap is use the scale and the brands that we have to take advantage of our trends. The third is international growth. International is a huge component of our business, it’s almost the third of our overall revenues. Our international networks which is a very significant revenue component is about $3 billion of revenue today, it’s about $700 million of operating income. We see that going to $1 billion over the next several years as we capitalize on strong secular growth characteristics in many areas of the world most notably Latin America.

And then the fourth element which is going to affect our earnings growth is just sticking with the core and driving operational efficiency. Over the last five years we’ve maintained cost growth of not in excess of very low single digits. And we’ve got to continue to keep a lid on cost while at the same time strategically investing on our businesses in order to be able to drive growth going forward. So we’ve got to be good at all four things. I think as you said over the last five years we’ve demonstrated our ability to execute on all those and we’re going to keep that going.

Ben Swinburne – Morgan Stanley

Great. That’s a great intro. Maybe we could move in the next several years get back to 2014 was the team you’re focused on. Any particular large drivers that you would want us to be reminded, obviously you think about the business next year?

John Martin

Well sure I mean look at as we’re finishing up this year 2013 we’re in the midst of our budget cycle or budget and planning cycle. So I can talk about some of the directional things but we are still in the process of tweaking our annual plan. But look I think next year it looks like it’s going to be another really good year for Time Warner. I think if you look at the networks and if you look at the Turner Networks it will be the first year of this acceleration of our affiliate rate cycle so we would expect to see affiliate revenues begin to accelerate at or close to double-digits next year. And as I mentioned possibly seeing somewhat of acceleration at HBO subscription growth. And I think next year in TV Warner Brothers is going to be another strong year, they’ve got difficult comparisons to this year but it should be another strong year. And we’re very optimistic about the film slate, which is going to have another Harry Potter movie, actually Harry Potter sorry I wish.

Ben Swinburne – Morgan Stanley

And it is there.

John Martin

Yes, another Hobbit movie.

Ben Swinburne – Morgan Stanley

Right, right.

John Martin

Which the first Hobbit movie did about $1 billion at the Global Box Office. We also have other projects like Jupiter Rising, Godzilla, and I forget the – it’s not Edge of what is it Mike, it’s not Edge of Darkness, Edge of Tomorrow, Tom Cruise Vehicle, Edge of Tomorrow, trust me it’s going to be great. So I think it’s going to be a good year. It’s also a year where we’re going to continue to make strategic investments to maintain or prove the competitive profile of our businesses. So one of the areas that I know investors are very focused on is programming cost growth at our networks and the level of cost inflation networks we’re experiencing there. Just by quick context we’ve said now for a number of years that our goal is in any one particular year to keep programming cost growth at no more than mid to high single digits.

And actually in 2012 programming cost only grew 2% in 2013 this year they’ll probably grow between 2% and 5%. So we just will have finished two years in a row where programming costs were growing below the low end of our annual expectation. So I think next year will be a year we’ll be at the higher end and the reason for that is because we’ve got the first year of our new Major League Baseball contract, we also see some acceleration of the NCAA Men’s Basketball contract amortization because this year which we’re very excited about in 2014 be the first year that our Turner Networks will broadcast the final four. And we announced yesterday or the day before we’re actually going to triple-cast which is going to be an interesting concept. So I think if you look back over the last five years we’ve grown margins at the overall company about 500 basis points or in excess of that, a lot of the strength of that margin expansion has come from our networks group.

As we look ahead over the next several years there is no reason to believe that, that margin expansion can’t continue. And as I mentioned the programming cost being at the higher end just to go back to the revenue comment that I made it’s also the first year of an acceleration of revenues which will somewhat offset that. But look we’re going to be making investments in HBO and our international ventures but we see opportunities and we see now it’s a particularly interesting opportunity to press our competitive advantage and make strategic investments to ensure that our businesses are not only continuing to delivery strong results now but that they’ve got a sustainable future.

Ben Swinburne – Morgan Stanley

Got it. That’s helpful. I want to dive into the decisions a bit. Before I do one of the things that we’re excited about and upgraded this [stuff] fairly recently was around sort of new blood and fresh management coming into lot of the divisions including yourself, you talked about before. What does that mean for shareholders and investors are looking at the company, what do you think we’re going to see from yourself from Richard, from Kevin who are now the new senior people at these divisions coming in really with fresh ideas and…

John Martin

Look I want to thank you for calling me new blood, been with the company for almost 20 years. But yes I’m – I will be rotating to a new assignment beginning on January 1 leading Turners as you say which I’m very, very excited about. And my seat is going to be occupied by Howard Averill moving over. I started at the company when I was eight. So look I think when we complete the spin-off of Time Inc. which we anticipate will occur in the second quarter of next year. What will be left of Time Warner is essentially a video content company I mean it’s a TV company, 90% of the profits of Time Warner will come from the TV ecosystem around the world.

And why I mentioned in the context of your question is I think over the past several years where we spun off Time Warner Cable and spun off AOL and now spinning off the magazine publishing business having a much smaller more focused content company, really will allow greater collaboration and greater strategic focus. And look it’s under Jeff’s direction that he is now put in place a new generation of leadership with Kevin at the studio and Richard at HBO and me at Turner and Howard as CFO.

And look I mean one of the things I’m really excited about is I’ve known Kevin and Richard for probably 15 years I like them, I respect them, I respect their businesses and I think we – the three of us are all very ambitious, we’re aggressive and we all want to see the company succeed. And I think where at a time where we’re going to need to continue to take risks at the company, calculated risks, prudent risks and we need to continue to drive a history of innovation that still exist in the DIA of our company. But I’m really excited about it. It’s an exciting time to be in media and it’s an exciting time to be at Time Warner.

Ben Swinburne – Morgan Stanley

Great. Let’s dive into the networks business and you let off in your four points talking about monetization on the subscription side and this has been a huge focus for investors as you obviously know heading into 2014. You mentioned the double-digit CAGR, help us think about the cadence of that growth over the three year period and you have done some renewals so now that you’ve got a couple on your pocket. How does that impact your sort of view of how this sort of play out?

John Martin

Sure. Yes, we have – this has been a busy year in terms of affiliate renewal discussions and we announced most recently on our earnings call that we had successfully completed new multi-year contract agreements with four of the nation’s largest distributors. And we’re pleased with that. The way that those contracts were culminated or completed was very consistent with the forecast projection that we made which was to achieve the double-digits for your annual growth.

And so we still have a number of discussions to complete before the end of the year. Our resolve is strong that we need to get paid for the investments that we’ve made and we think we bring a tremendous amount of value to the distributors and to consumers. We represent almost 20% of our basic cable viewing and we have hugely valuable networks. And so the discussions have been very constructive and we – assuming that we get out of this year successfully completing these deals this year that means we will have completed deals that with distributors that represent roughly half of the U.S. households. So it’s been an incredibly busy year and so far we’ve been pleased.

Ben Swinburne – Morgan Stanley

Any comment on the cadence of growth…

John Martin

Yes, I’m sorry, should have answered that. That’s been a big question because when you say double-digit…

Ben Swinburne – Morgan Stanley

Right.

John Martin

People say was it double-digit, double-digit, double-digit over the three years and the way that the contracts will come into recognition next year we expect the domestic affiliate rates to be at or close to double-digit. In 2015 it will probably moderate somewhat from a growth rate standpoint to be closer to mid-single digit and then in 2016 we’ll get the full benefit of all of the deals that would be a strong double-digit growth rate to get to the double-digits over the three year period.

Ben Swinburne – Morgan Stanley

Got it.

John Martin

And we’re working hard beyond 2016; we got enough to talk about right now.

Ben Swinburne – Morgan Stanley

Okay. How has TV Everywhere and sort of digital mobile rights played into those conversations and are you satisfied, is you getting compensate for it?

John Martin

Well look it’s an interesting question I think in its simplest form and I think our company has been at the forefront from a communication standpoint to say that we believe that it’s in the industry’s best interest to continue to strengthen the value of the multi-channel television subscription so that an average household believes that for every given dollar they’re getting more and more value. And as a result of that what we’ve proposed and what we’ve been a strong proponent of is allowing consumers increasingly to have greater and earlier access to the best content and allowing them to have access to on-demand content increasingly with mobility as an element at no additional cost above and beyond what’s – what ticket charge is part of the multi-channel subscription. And it’s going okay, it’s going okay in a sense that it’s gotten broad support from the industry which is we’re pleased to see. So it’s talked about a lot in the industry but the problem right now is that it’s still hasn’t resonated with consumers, consumer awareness is still very low, distributors I think have been very slow to embrace a user experience that consumers would really find attractive. The authentication process is still been extremely uneven from distributor to distributor and the grants of rights of content have made the experience less than what it fully can be. So, look we only believe more firmly in this concept than we’ve ever done before meaning that we know that a greater percentage of video consumption going forward is going to be in a non-traditional non-life manner it’s going to be on demand.

There are examples of robust on demand services and there is no reason to believe that the entire ecosystem can’t evolve to that point. And I think when and if it does the value to the consumer is going to be dramatically enhanced, then it’s funny so much of these discussions end up being how much money can a programmer extract from the distributor and how much money can the distributor pass on to the consumer. I think there needs to be more conversations within the industry about how we can work together as partners to actually drive the value proposition to the consumers in a more enhancing and constructive way because that had to be able to drive subscriptions reduced churn, allow greater monetization possibilities to advertising. And I’d say it’s - I don’t mean to be negative, it’s happening it’s just it’s – there is a window of opportunity here that I think the industry needs to see because it’s not going to last forever

Ben Swinburne – Morgan Stanley

You mentioned four of the top 10 you’ve done or top distributors have already been done have those included?

John Martin

We were very early, we granted broad-based TV everywhere rights to virtually every distributor before this round of affiliate renewals with the exception of Time Warner Cable who has been unwilling to sign whatever the other distributors been willing to sign. So, yes there be part of the discussions, we’d frankly it’s – it hasn’t reached its full potential where we can actually put an economic value on rights, right.

Ben Swinburne – Morgan Stanley

Great. Let’s move on to – we talked lot about subscription trends, let’s talk about advertising the strong third quarter, what are you seeing in the Ad market today and anything you’d highlight good or bad.

John Martin

Sure. The advertising environment right now is very consistent to one we announced just a few weeks ago. I would say so the three buckets of our advertising, the first is entertainment which is the biggest share of our money. Entertainment scatter advertising is moving along very well, we’re continuing to see pricing increases that our double-digits ahead were higher than what we closed in the most recent upfront which was only a few months ago. And with the particular demand and emphasis on sports, we saw very healthy gains from our Major League Baseball playoffs and it’s very early in the NBA season but only are we seeing weightings gains for our NBA games which is very encouraging, but we’re seeing very strong advertising demand for sports.

News over on the CNN side, not as strong it’s a bit of mixed bag, we’re seeing news scatter not have a lot of volume. And so pricing becomes a little bit less relevant on that I mean but again the news part of money is less than entertainment. And then in Kids I’d say the continuation of what has been a multiyear trend in Kids which is the category that doesn’t expanding.

Ben Swinburne – Morgan Stanley

Okay, great. You mentioned the NBA so I want to talk about sports more. One of the things people are excited about the Time Warner is the ability to drive margins over time but there is a concern about rise in sports cost and that’s a decent part of your P&L. How are you thinking about managing sports program and cost and how does the NBA renewal coming up in the few years factor?

John Martin

We manage program and cost as a portfolio and to just provide some slide context, we have about $5 billion of annual programming cost between HBO and Turner, HBO is about 40% of that and Turner is about 60% of that of Turner is $3 billion of programming cost, sports represents a little bit more than a $1 billion. And Turner has sports contracts and rights with Major League Baseball that go out through 2022. And the NCAA Men‘s Basketball Championship that goes out through 2024. These are very high profile, very valuable sports franchises. The NBA is the one as you mentioned is the only contract that comes up by the end of 2016.

And look, we have been Turner has been an extremely well in term successful partner with the NBA that I think goes back 25 years. And we think that we’ve got an incredibly constructive and valuable partnership between the two of us but we understand that it will be a competitive bidding situation and we are – we would like to keep the relationship with the NBA I mean at some point as we do with any asset allocation decision if the rights costs get to be an excess of what we think the economic value is, we’ll have to make alternative plans. But getting back to the size of the NBA within our $5 billion programming budget it’s just not that big.

Ben Swinburne – Morgan Stanley

Yes.

John Martin

So, and we can already see there are elements of the $5 billion programming cost that we know are going to grow at a much slower rate than even the 5% that I mentioned. So, when you manage it as a portfolio over a multiyear period, it’s one of the reasons why we have a fair degree of confidence that we can continue to invest at the optimal rate to maintain our lead competitive position, but at the same time be physically responsible on cost.

Ben Swinburne – Morgan Stanley

Great. Let’s shift from U.S. to the international network strategy, you called throughout the $1 billion a line number you had 700 today. What’s driving that growth regionally and hence what are the secular trends behind that business?

John Martin

Sure. I mean look it’s been a very exciting growth opportunity at our company. Over the last four years our international networks I think revenues are up 60% and operating income has doubled. And if - where we’ve been focused to try to build scale with our cable networks outside the U.S. have been principally in Latin America, Asia and Central and Eastern Europe. We have a network position in the more developed countries in Europe but it’s not as an attractive scale and we’ve been moving more to improve the operational efficiency there as compared to really going after top-line growth.

Latin America has been a runaway success. Time Warner with HBO, Turner and Warner together is the number one provider of multi-channel television outside the U.S. in Latin America, so Brazil, Mexico, Chile, Colombia, Argentina. And there we’re riding the wave of dramatic secular growth in pay television penetration and broadband penetration notwithstanding the fact that there has been explicit growth over the last several years, there is still very low penetration rates relative to most other countries. And so we think that growth has got a multiple year time horizon on it. And because we’ve got attractive scale in Latin America, we’ve been able to enjoy attractive unit growths from our existing networks, launch new networks and benefit from a maturing of the advertising cycle and we think that can continue.

In Asia, we think there is still opportunities to launch new networks. HBO just launched the first ever premium channel in India, we’ve launched several new kids channels recently and we’re going to be looking to opportunistically launch new networks there to take advantage of what’s still is not a completely mature market. In Central and Eastern Europe is an area that we have a lot of interest in and it’s been one that’s been economically hit hard, so we’re going to continue to watch that but look when you take it overall as a portfolio of networks and network positions, and it’s get back to the program and cost question and the margin question. We still believe that our international cable networks that they represent one of the most attractive margin opportunities that we have over the next several years as we take advantage of secular growth and prove our operational efficiency and manage our cost structure to optimize against what the revenue opportunity is.

Ben Swinburne – Morgan Stanley

Great. And on HBO, obviously it’s an asset that owns the vast majority if not all but the regional programming. Are you thinking about that business internationally as they both have licensing and a network model?

John Martin

Yes, internationally HBO’s revenues and again just to start with some context, HBO consolidates its operations everywhere outside the U.S. with one exception which is a partnership where they own 88% of Latin America. Including the unconsolidated Latin American operation, HBO’s revenues in north of a $1 billion, they have been growing double-digits its operating income has been growing double-digits. The business that we talk about is really three businesses, it’s a network ownership business, it’s a licensing of content business and it’s a home entertainment business.

Starting with the networks, HBO owns and operates networks in 70 countries and I think it’s largely the leader in every country in which it operates in. And there we’ve been experiencing very, very strong unit growth, subscriber growth in the places where network - where the networks are owned and we’ve been launching new networks, recently launched HBO Nordic, HBO Netherlands in addition to HBO India that I just mentioned. And the global popularity of HBO has allowed it not only to export the very successful U.S. shows and either dubbed them but also to increasingly make local content in markets to strengthen the local identity of HBO. We’ve also launched HBO GO as a companion product in many, many countries where those that might not know what HBO GO it’s a broadband product that has virtually the entire library of HBO originals on demand with the very elegant user interface and that’s again we see that as a very important value enhancer to the HBO subscriptions. So, we’ve now launched HBO GO on an authenticated basis in 12 countries in Europe and then 9 countries in Latin America and Asia and the goal would be to continue that rollout.

In the – in where we don’t own our control networks, HBO license is its content in a 150 countries with very big and strong licensing agreements in Germany and in the UK and Australia and Canada. And that’s a very big business and that’s a growing business. And as you think about strategic optionality in the future where HBO doesn’t own a network and it could potentially be an attacker. The strategic tradeoff will be do we want to continue to license the HBO branded content to other network owners and other distributors, or do we want to develop our own asset and that’s something that we’ll continue to consider over time but the HBO growth story outside of the U.S. is a very strong one.

Ben Swinburne – Morgan Stanley

You mentioned the Latin American business which has been really strong, is there a path to consolidation there or are there regulations around?

John Martin

Look, I think our current relationship is fine I mean we have – HBO owns 88% of HBO Latin America, a partner who is been a partner there for years and [indiscernible] is a very, very valued and respected partner, it’s provided valuable input. And again order of magnitude it’s a $600 million revenue business it has operating that come up about a $160 million but it’s really benefiting from the secular trends that I mentioned a little bit earlier in Latin America and more and more is joining the scale that where we have the Tuner and HBO and Warner’s to ensure that we’re getting the maximum throughput from the assets that we have in the region. So, I think other than the modest annoyance that it’s not consolidated in our results. The business itself is robust and we’re quite pleased with it.

Ben Swinburne – Morgan Stanley

Great. One last question and then we’ll move to Warner’s. There is a lot of – do I look like I’m falling over?

John Martin

I don’t know.

Ben Swinburne – Morgan Stanley

I feel like I’m falling over.

John Martin

These chairs are hard, I just throw that out, I would try to sit straighter, yes I try myself slight.

Ben Swinburne – Morgan Stanley

Right, right.

John Martin

I don’t want you to think it’s from the tenacity of your questions.

Ben Swinburne – Morgan Stanley

Right, right. For the heel that coming out of the chair.

John Martin

Yes, yes, I wish.

Ben Swinburne – Morgan Stanley

Either way. There is a lot of press around a recent Comcast offer that included HBO in a much more strip down video package along with broadband and HBO has been sitting I think roughly $30 million household U.S. for a while. What’s your view of that opportunity in the U.S. for HBO and thinking about repackaging the product? And does that impact if at all the Turner at this which obviously significant for the company but said in the basics here.

John Martin

Well, I think couple of comments on that and this came up on the earnings call and Jeff have an opportunity to comment directly on this as well. It’s unclear how attractive and how deeply penetrated this new offering will go, I think it’s a much smaller package of basic cable networks that are more broadcast basic like and it has HBO as part of that. HBO it’s obviously a good thing, anytime we can partner at HBO with the distributor and know that the distributor is going to actively market to a particular segment of the population to the extent that, that results and incremental penetration for HBO that’s great.

But I think my own personal opinion but probably a better question for Comcast, there may be somewhat limited demand for a product like that because I don’t think there is a tremendous amount that demonstrated example where U.S. households want a smaller video package I mean they could get that today a lot of the distributors offer low end packages and they’re not terribly successful and that’s a reason why we estimate the average revenue per household for in the U.S. is about $80 I mean you could probably pay $20, $30 but this is not that attractive because culturally Americans just watch a tremendous amount of television.

So, it’s unclear, I think the only other thing I would mention is because it’s a combined broadband and smaller video package, we’re estimating that there is somewhere between 8 and 9 million households in the U.S. that already have broadband that don’t have video. So, that might be an interesting segment particularly for HBO to be able to sold into I mean what’s even more exciting than the Comcast package is the fact that that there is still is domestic growth for HBO with their existing partnerships with the distributors and I suspect with some hope and optimism that the next few years might be better in terms of domestic growth in the last few years, so.

Ben Swinburne – Morgan Stanley

Great. Let’s shift over to Warner’s on the film side; it’s been a very strong year with two young kids I go to movies really once every 18 months but I do get to see Gravity which is excellent. What’s the outlook look like for the studio in your mind, maybe if we can do television and film in one shot as we watch the lock and actually get the audience in time?

John Martin

Yes, sure. I mean look the short answer is I think the outlook is very strong, and yes we got a really good year this year. We had Hobbit, Gravity, Great Gatsby we had two smaller budget movies that really broke through The Conjuring and We're the Millers. But at the beginning I feel like the beginning of every New Year it’s always the same conversation it’s like well Warner Bros did very well at the box office last year, it’s going to be impossible comps, what do you think about the next year. And yet the team there has done an amazing job of consistently delivering top results. So, we have a lot of projects to be optimistic about.

And on the television side, as I mentioned I think in my earlier comments there is some really attractive secular growth characteristics being in the television production business. And it’s not tied to anyone element of buyer or form of purchase, I know there is a lot of discussion around SVOD and we could talk about if you want. But Warner has such a broad and deep source of revenues that it’s going to be fine as long as it makes great projects no matter what. And with the fact that they have such a large presence on current broadcast season and they have a nice syndication pipeline, next year we’ll have Mike & Molly in syndication, traditional syndication, the year after 2015 is going to be a big year with Two Broke Girls and I can’t remember the year, the course of interest is either 2014 or 2015 it’s 2015 thanks Mike. So, 2015 is going to be a big year with percent of interest and Two Broke Girls and additional projects after that.

Ben Swinburne – Morgan Stanley

Great. Let me ask one more on the balance sheet side and then we’ll open and see if the audience has any questions. So, you have a big transaction or spin-off coming up, it’s been away over the last spin of Time Warner on the timing side. Arguably the business is a bit less cyclical coming out of this spin-off. How are you thinking about balance sheet, leverage and use of capital after the spin?

John Martin

Well with the caveat being that would me moving to Turner and probably going to have less input going forward than they have in the past. I think it is – I’m confident in saying that the approach that the company has taken towards capital allocation will likely remain very consistent going forward. And our approach has been one of balanced I mean obviously from a priority standpoint first and far most invest in new businesses, use M&A opportunistically to try to improve our competitors position where you can the company has a very large dividend commitment that has been raised each of the last four years, double-digits annually, it’s about a $1 billion a year.

And we’ve opportunistically used over the last number of years share repurchases which I think over the last four years has been about $14 billion. And as I mentioned in my opening remarks, we’re continuing to buy a pace currently. We have a long-term target leverage ratio 2.5 times, we’re getting off to lots of questions as to whether that’s going to be revisited. We were visited all the time. And so, sure I mean as a result of the timing spin of the leverage target will be revisited but I think it’s important to understand that from a growth step standpoint, we are a large industrial borrow, we have nearly $20 billion of gross dent and a 2.5 times leverage ratio I think perfectly strikes the balance.

Of on the one hand trying to minimize your weighted average cost of capital, but on the other hand ensuring that we as a company retain adequate flexibility and at the same time allow for consistent access to the market for new capital with attractive pricing. And so I strongly suspect that, that approach and that discipline will remain unchanged because in the end it’s really been Jeff’s leadership and with the Board we take very seriously that the responsibility that we have as capital allocators and we want to make sure that we’re employing capital to the best and highest use.

Ben Swinburne – Morgan Stanley

All right, terrific. Why don’t we see if we have any audience questions? Please wait for microphone. Go ahead.

Earnings Call Part 2:

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