Peter Kafka

Recent Posts by Peter Kafka

Gossip Girl Is a Digital Cash Cow for Time Warner

Another reminder of how lucrative Web video has turned out to be — for now — for Big Media: Time Warner says new deals with Netflix and Hulu will generate $100 million in highly profitable revenue this quarter.

John Martin, Time Warner’s chief financial officer, told analysts on the company’s earnings call today that the two deals, to license reruns like “Gossip Girl” from the CW Network, will have an immediate impact on the company’s earnings. About half of the $100 million will be booked as operating profit, he said.

CBS, which co-owns the network with Time Warner, should see the same results. CBS reports its earnings tomorrow.

This doesn’t mean Time Warner thinks the deals will generate $400 million a year over their lifespan. The Netflix deal in particular is tied to the CW’s fortunes, so the revenue will vary depending on how its shows perform.

Still, this is basically found money for the company. The same goes for every big media company — like Disney, News Corp. (which also owns this Web site) and Comcast — that has made digital distribution deals in the last year or so.

In the best-case scenario for the content guys, the Web video race becomes even more heated, and players like Apple, Microsoft and Google start trying to compete with Hulu, Netflix and Amazon.

But they’re also trying to avoid training consumers to expect to see their stuff on Web services right away, because their shows and movies are still more valuable for them when they’re distributed through traditional outlets. Tough tightrope to walk, but so far no one has stumbled.

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