Film companies and consequently media conglomerates have been in the business of cable distribution and television production (both broadcast and cable) for decades. Of course, until the Financial Interest and Syndication (“Fin-Syn”) Rules were fully repealed in 1995,[5] [open endnotes in new window] there was a separation of ownership maintained between film studios and broadcast networks. Yet, the cable and film industries have enjoyed a history of common ownership that goes back to the 1980s. Time Warner offers a prime example of the longstanding relation between the two industries—both companies were busy integrating cable programming and distribution assets into their portfolios for decades. Interestingly, at the time of the merger of Time and Warner, it was mainly discussed in the trade and popular press as the union of a major publisher and a movie studio. However, the deal also created one of the world’s largest cable distributors, which it united with the biggest producer of primetime television in the United States.

In fact, the companies had actually been bitter enemies, competing against one another in the cable business during the late 1970s, often going after the same local franchises (with Warner repeatedly outmaneuvering Time to win the contracts). Time had owned cable systems since the 1960s and programming services (“cable channels”) since the 1970s, when they invested with Charles Dolan, an early cable entrepreneur and owner of the first U.S. underground urban cable system—Sterling Manhattan Cable in New York City. Time also had an ownership stake in The Green Channel, which became Home Box Office in 1972.[6] Further, Time had participated in the 1987 bailout of Ted Turner by many of his competitors in the cable industry, which gave Time 14% of Turner Broadcasting. At the time of the merger Time also owned Cinemax, which HBO had started in 1980, and it controlled ATC (American Television and Communications Corp.), a giant cable system.

Warner had also been extremely active in the cable business. It, too, held a stake in Turner Broadcasting and also owned Warner Cable, a major cable distributor. By 1990, the merged company would have a stake in a massive array of successful cable properties, including

  • Turner Broadcast Systems (WTBS, TNT and CNN),
  • BET,
  • E! Entertainment Television,
  • Court TV,
  • The Comedy Channel,
  • HBO,
  • Cinemax,
  • Movietime, and
  • various regional systems in addition to what ultimately became
  • Time Warner Cable—the second largest cable distributor in the U.S. after TCI with systems in thirty-five states.[7]

And the media portfolio of Time Warner went far beyond the domestic: HBO had a pay-TV service in Turkey, German television holdings, British production and distribution interests, Scandanavian pay-cable investments and Eastern European television channels.[8] HBO was also intensely focused on Hungary’s media landscape in the wake of Communism’s fall, and HBO Hungary was the company’s first European channel in 1991. In fact, the company was so aggressive in staking its claim in the newly freed market, it was said that HBO “wrote its own media law… [and] transformed Hungary’s cable television business in its own image.”[9] HBO Poland and HBO Czech Republic followed shortly thereafter.[10]

When the two companies came together, cable earnings were equal to revenues from “filmed entertainment,” publishing, and music—with each sector accounting for roughly a quarter of the company’s profile on the annual report. Filmed entertainment is an extremely important yet somewhat mysterious catchall category in the annual reports for media conglomerates. The category’s constitutive products vary by company and are not usually broken down for the reader, but they can include everything from theatrical film, television production, home video, electronic delivery, television licensing, and consumer products. Therefore, while it is never clear what exactly these filmed-entertainment numbers refer to in the corporate accounting, it is widely known that the majority of those earnings derive from revenue related to television production or distribution in some form. This category is at the heart of how “film” becomes overvalued in the conglomerate paradigm.

[ Note: All the charts that follow are generated by author based on data compiled from SEC filings and Annual Reports to Shareholders.]

By 1996, publishing and music had both dropped to about 15% of the company’s earnings, filmed entertainment dropped to about 20% and cable jumped to about 40%. In 2008, on $46.9 billion in earnings (up 1% from 2007), cable was still the largest category of earnings, followed by filmed entertainment, networks, publishing and AOL. The filmed-entertainment category in this case was comprised of production and distribution of theatrical film, television programming, home video, video games, television licensing, and consumer products. In 2008, the company actually broke down such revenues and revealed that only $1.8 billion in filmed entertainment came from theatrical film (which was 13% less than the income from the previous year, despite the fact that 2008 saw the release of Warner Bros. The Dark Knight).

This specificity allows us a greater perspective on the question of what kind of significance film holds for an entertainment conglomerate. When looking to the annual reports here for answers, in Time Warner’s case, it represents about one-quarter of the revenue—or just 3% if one is referring to theatrical film only.

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