Time Warner doing well, says CEO

Jeffrey Bewkes says TV, film driving growth

SAN FRANCISCO -- The stars of Time Warner in 2008 have been the conglomerate's core TV and film businesses -- "The Dark Knight" has been doing pretty well, you might recall -- and they'll continue to drive growth the rest of the year, CEO Jeffrey Bewkes said Wednesday.

Film division revenue rose 14% in the second quarter and operating income jumped 16% powered by "Sex and the City" and "Dark Knight" and higher contributions from DVD releases "I Am Legend" and "10,000 BC."

During an earnings conference call, Bewkes suggested "Dark Knight," which this week passed the $400 million plateau at the U.S. boxoffice in a record-low 18 days, could become the highest-grossing film ever. And to critics who highlight the hit-and-miss nature of the film business, he said: "Our hits far outweigh our misses."

"Sex and the City" has grossed more than $150 million in the U.S. Additional films based on DC Comics characters and TW's TV library -- a la "Sex and the City" and "Get Smart" -- are on the horizon, Bewkes said.

Time Warner's TV networks unit is likely to bring in the biggest gain out of all divisions in operating income before depreciation and amortization for 2008, even though growth momentum could slow in the back half because of tough comparisons, management said. In the latest quarter, TV ad revenue rose 11%.

Overall, TW posted a 5% second-quarter revenue gain to $11.6 billion, led by increases in film, TV and Time Warner Cable, which is being prepared for a spinoff. Adjusted OIBDA rose 4% to $3.2 billion, driven by the same units.

However, TW's second-quarter profit of $792 million was down more than 25%.

Bewkes said TW's operations generally are holding up well despite a weak U.S. economy, and he again expressed bullishness about day-and-date film releases on VOD, saying all TW movies this year, except for the next "Harry Potter" film in November, will be released in that fashion.

On Tuesday, News Corp. president Peter Chernin said his company continues to test day-and-date, but he's still debating whether the strategy cannibalizes DVD sales.

Bewkes also said AOL is moving closer toward running its access and audience businesses separately. Analysts suggest that TW will sell the access business.

TW took an $18 million noncash impairment charge for online video game business GameTap because of Turner Broadcasting's decision to sell it. "There is considerable marketplace interest in the GameTap business and brand," Turner said. "We are considering various strategic options."

Speaking about ad trends, Bewkes said Turner's upfront was strong, with its entertainment networks seeing CPMs rise in the high-single percentage range and dollar volume up well into the double digits.

CFO John Martin said ad scatter prices remain "healthy" and ahead of upfront levels.

Despite the outperformance by the film and TV divisions, TW reiterated its 2008 guidance, citing underperformance at AOL and the Time publishing unit. Bewkes said TW is running ahead of its target of reducing annualized corporate costs by $50 million this year.
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