TW outperforms in Q3 but cuts forecast for the year
EmptyNot even Time Warner's businesses are completely immune to some economic hit, but the company seems to be holding up better than most media conglomerates.
TW and Time Warner Cable on Wednesday reported better-than-expected third-quarter profits but reduced full-year outlooks. TW cited mainly restructuring charges plus advertising weakness at AOL and Time, while Time Warner Cable said it has seen a slowdown in subscriber growth in the current quarter, particularly in phone and such services as PPV and DVRs.
"The quarter's solid earnings and superior free cash flow show the resilience of our businesses in spite of the challenging economic environment," TW CEO Jeffrey Bewkes said.
CFO John Martin told analysts the company is "cautiously optimistic" that ad sales at TW's cable networks can continue their momentum. But he also warned that "we can't fully gauge the impact of recent events in the financial markets on the broader economy, and Turner would not likely be immune to any widespread, protracted ad slowdown."
Management said that Turner's scatter ad rates are "modestly" ahead of prices charged during the upfront season. Bewkes said the industry outlook is hazy, but he emphasized that only 20% of TW's revenue is exposed to ads and that the firm has no local ad business, an area of much weakness.
The film and DVD outlook also is hard to gauge, though Bewkes said movie tickets seem "fairly resistant" to economic pain. He added that TW's home entertainment unit should outperform others even in a weak economy. Bewkes said, for example, that DVD sales are down 2.5% industrywide for the year, while TW is up 7%.
Even the cable business, traditionally considered recession-proof, isn't safe in a downturn, Time Warner Cable CEO Glenn Britt suggested in a separate conference call Wednesday.
"If people continue to lose their homes and jobs, it would be naive to assume that there would be no impact on our business, and in fact, as we moved into the fourth quarter, we saw a significant slowdown in subscriber growth compared to last year," he said.
TW reported a third-quarter profit from continuing operations of $1.1 billion, up 22%, thanks to a 9% gain in ad sales at the cable networks and the blockbuster "The Dark Knight." Revenue was virtually unchanged at $11.7 billion. (partialdiff)