The broad trend in the television industry is that viewers are moving away from linear, ad-supported programming toward on demand, a la carte viewing they can pay for directly. The response at Time Warner has been to begin offering premium networks like HBO to customers without a cable subscription, allowing anyone with an internet connection to pay for access. On today's earnings call, the company said it also plans to try and increase the value of the traditional cable bundle by significantly lowering the number of ads it shows.
Time Warner posted generally strong earnings this morning, driven by the success of Warner Bros. films and games and overall growth at HBO. By contrast, at its traditional TV business, Turner, revenue declined. To try and combat this, executives repeated several times on today's investor call that they plan to experiment with reducing the number of ads shown on some of Turner's cable channels, starting with networks aimed at younger viewers, like TruTV.
According to Variety, the plan is to decrease the volume of advertising from 18 to 19 minutes of ads per hour all the way down to 10 or 11 minutes per hour. That's a drop of about 43 percent. On today's call, Time Warner framed it a little differently, saying it planned to increase the amount of programming per hour by around 21 percent.
The move mirrors a similar attempt to eliminate advertising at YouTube, which recently rolled out a new subscription offering, YouTube Red. That service, which eliminates all ads for $9.99 a month, hopes to grow the pool of revenue content creators can use to make highly produced originals. And of course, at the same time, it eliminates the problem of ad blockers, which improve the consumer experience, but eliminate revenue for both YouTube and content creators.
Asked what the impact of the change would be on the bottom line, Turner executives told analysts that reducing some of the ad load on networks like TruTV would have little to no impact on overall revenue, suggesting the current model for advertising isn't generating very meaningful upside.