Time Warner First-Quarter Profit Drops, Revenue Rises
NEW YORK - Time Warner on Wednesday reported a lower first-quarter profit of $651 million amid a stronger performance of its TV networks business, but lower film results.
The latest earnings compared with a $725 million profit in the year-ago period, marking a 10 percent decline. Revenue at the entertainment conglomerate rose 6 percent to $6.7 billion as advertising revenue grew 20 percent. Time Warner's results exceeded Wall Street expectations.
Film unit revenue declined 3 percent to $2.6 billion amid tough comparisons with theatrical and home video releases in the year-ago period, which included Sherlock Holmes and The Blind Side, as well as a greater number of home video releases. Analysts have also pointed out that the latest period had a shortage of big film hits with such releases as Sucker Punch, Red Riding Hood and Hall Pass.
The film weakness was partly offset by higher TV license fees and stronger video games revenue in the unit. Adjusted operating profit for the film segment dropped 50 percent to $155 million driven by the lower revenue. Management said it still expects a record film profit for the full year due to its film slate, momentum in its TV production business and promising video games.
At TW's TV networks unit, revenue increased 18 percent to $3.5 billion thanks to 9 percent growth in subscription revenue, a 31 percent Turner advertising revenue gain and a 48 percent increase in content revenue. Content revenue was boosted by higher sales of HBO’s original programming, including The Pacific, Sex and the City and Boardwalk Empire. The ad strength was driven by strong ad rates and the new rights to the NCAA basketball tournament, which Turner channels now share with CBS. HBO subscription revenue benefited from higher U.S. rates and international expansion.
Adjusted operating profit at the networks division grew only 2 percent to $1.2 billion though as higher revenue was largely offset by increased expenses, including higher programming costs, particularly for the NCAA tournament. Chairman and CEO Jeff Bewkes said though that the tournament rights will be "very profitable" over time. On a conference call, he also lauded a more than 35 percent gain in primetime ratings at CNN in the first quarter thanks to a range of breaking news in the Middle East and elsewhere. He argued that this is latest proof that CNN will always be a key network for TV distributors even if its ratings fluctuate.
“We’re off to a solid start this year," Bewkes said: "We’re on track to meet our financial goals for 2011."