The Math Behind Time Warner’s Bleacher Report Deal
Turner paid some $180 million for Bleacher Report yesterday, a move that gives the cable programmer a bunch of online sports inventory to sell to advertisers.
Reminder: Turner used to have a bunch of online sports inventory to sell to advertisers. But it recently had to give much of that to its corporate coworkers.
Last quarter, Turner handed back control of Golf.com and Sports Illustrated’s Web site to Time Inc., ending an unhappy arranged marriage between the two Time Warner units.
By my math, the divorce cost Turner about $40 million a year in ad revenue, a deficit it’s trying to fill with Bleacher Report.
Here’s where I’m getting the numbers: Last week, Time Warner CFO John Martin told investors that the addition of Golf.com and SI.com improved Time Inc.’s advertising revenue by 2 percent last quarter.
That is, without those sites, ad revenues would have slipped 9 percent, from $508 million to $462 million, instead of falling 7 percent, to $472 million. That’s a $10 million gap.
It’s possible that $10 million is a quarterly anomaly. But assuming it’s not, that implies a $40 million annual run rate for those two sites. Now look at the reported $30 million that Bleacher Report is supposed to make this year, and the deal lines up quite nicely.
Meanwhile, if you’re looking for thoughts on what the transaction says about low-cost Web “content creation,” let me suggest Mathew Ingram’s take, over at GigaOM.