- Share this article on Facebook
- Share this article on Twitter
- Share this article on Email
- Show additional share options
- Share this article on Print
- Share this article on Comment
- Share this article on Whatsapp
- Share this article on Linkedin
- Share this article on Reddit
- Share this article on Pinit
- Share this article on Tumblr
Time Warner on Wednesday reported improved third-quarter financials as its film unit posted a record adjusted operating profit in the latest period as it benefited from the final installment of the Harry Potter franchise.
Time Warner on Wednesday reported improved third-quarter financials as its film unit more than doubled its bottom line to hit a quarterly record thanks in part to the final installment of the Harry Potter series.
On a conference call, management said that 2011 will be a record year for TW’s Warner Bros. studio in terms of the bottom line and discussed how recent Netflix and Hulu deals will boost the financial performance of the CW network.
The entertainment conglomerate, led by CEO Jeff Bewkes, posted a quarterly profit of $822 million, up 58 percent from the $520 million recorded in the year-ago period. The latest figure handily beat Wall Street expectations. Revenue rose 11 percent to $7.1 billion, marking the company’s highest growth rate since the third quarter of 2007.
TW raised its full-year guidance for adjusted earnings per share from “at least low double digit” growth to a forecast of growth in the high teens.
“Our results demonstrate the success of Time Warner’s focus on investing in great content that audiences love and leading the evolution of how it’s delivered,” said Bewkes. “Warner Bros. had a record-setting quarter, led by Harry Potter and the Deathly Hallows: Part 2, which grossed $1.3 billion at the box office globally, ranking as the third-highest grossing film ever and capping an unprecedented franchise run.”
He also lauded Warner Bros. for “an excellent start in the new TV season” with returning series, such as The Big Bang Theory and Two and a Half Men, and new shows, including 2 Broke Girls, Suburgatory and Person of Interest.
Film unit revenue at TW rose 19 percent to $3.3 billion and adjusted operating income rose 153 percent to $528 million, a quarterly record, as the final Harry Potter film, Contagion and Horrible Bosses and higher TV fees from the off-network availability of Big Bang Theory more than offset weaker home entertainment results.
Bewkes lauded the studio’s “fantastic performance” and said the Potter franchise will keep going following the final film’s DVD release with such offers as a behind-the-scenes tour set to launch in London in 2012. Advance sales just started and blew away the company’s expectations, he said.
Management predicted a strong fourth quarter for the film unit with the help of sequels to Sherlock Holmes and Happy Feet.
TV networks unit revenue rose 7 percent to $3.2 billion on continued affiliate fee gains and 9 percent advertising growth. But adjusted operating profit declined 4 percent due to higher expenses, including for marketing and programming. Bewkes said his team was “pleased with the early success of The Big Bang Theory on TBS, illustrating how our content can create value across the company.”
CFO John Martin said that assuming there will be no NBA games in the current quarter, TW’s TV networks unit will see no material financial impact despite lower ad revenue. He also said that scatter ad pricing is currently up slightly from scatter in the year-ago period.
The company’s Wednesday earnings conference call with analysts also featured discussion recent digital distribution deals of the CW, which TW co-owns with CBS Corp., with Netflix and Hulu. Bewkes said that TW’s stake in the CW has already been profitable, because it provides a valuable platform to launch new series, but the new deals will “substantially improve” the network’s financials. Martin said they are worth hundreds of millions of dollars in revenue for the Warner Bros. TV arm, with the fourth quarter likely to see a recognition of a little more than $100 million in revenue and about half that figure in profit. Bewkes said the deals are consistent with TW’s view that there is room for Netflix and others to get older and serialized shows on demand online. He also emphasized that the deals add money to the TV eco-system, because they help better monetize content.
Martin confirmed on the call that TW is evaluating its New York real estate investments, but didn’t provide a timeline for when a decision on the future use of the Time Warner Center and other company office buildings could come. He also said that the conglomerate is looking for ways to cut corporate costs after pension and other previous changes have yielded savings in the hundreds millions of dollars range.
Discussing digital film business plans, Bewkes said TW’s Flixster service will add new features soon, such as a complimentary movie offer when people sign up for a new account for digital locker UltraViolet and the ability to convert DVDs that people own into digital copies.
Sign up for THR news straight to your inbox every day