18 November 2009

Revenue Down For Time-Warner

NY Times

Time Warner, the media conglomerate that was once the world’s largest but has lately slimmed down by shedding some businesses, said both revenue and profits declined in the recent quarter.

The results were hurt by one business that the company has said it will spin-off — AOL — and another that has been battered by the advertising recession and is not viewed by executives as central to the company’s future, the Time Inc. magazine publishing empire.

The company’s biggest business, cable networks, which includes channels such as HBO, TNT, TBS and CNN, gained in revenue and profit. Revenue at the movie unit, the Warner Brothers studio, declined mainly because of lower DVD sales, a trend that has been felt across Hollywood, although its profitability improved.

Time Warner’s performance, like the results posted Monday by a rival, Viacom, is emblematic of a mainstream media industry that is largely contracting as consumers change how they view television and movies. The trend is compounded by the recession.

So media executives are left to cut costs to maintain profitability, rather than increase the revenue pie.

“We are executing well, despite the tough environment,” said Jeffrey L. Bewkes, Time Warner’s chief executive officer, in a conference call with Wall Street analysts.

Over all in the third quarter, revenue declined 6 percent, to $7.1 billion. Net income was $661 million, down from $1.1 billion in the last year’s third quarter. Operating income decreased 10 percent, to $1.4 billion.

The results, though, were better than Wall Street forecast, and the company raised its financial outlook for the remainder of the year. Excluding certain items, the company reported earnings-per-share of 61 cents, better than the 55 cents expected by Wall Street, according to Thomson Reuters.

AOL posted a 23 percent drop in revenue, to $777 million. But the company plans to complete its spin-off of the unit by the end of the year. At Warner Brothers, revenue fell 4 percent, while operating income increased 6 percent to $291 million.

Warner Brothers, like other studios, is facing a decline in DVD sales, which once drove growth in Hollywood. But the performance of the unit, particularly the increase in profits, surpassed what many on Wall Street expected. The studio’s major release in the quarter was “Harry Potter and the Half-Blood Prince.” “I think the most noteworthy thing in the quarter is film,” said Anthony DiClemente, an analyst at Barclays Capital. “They’ve grown operating profits at film for each of the past six quarters. “A lot of it is streamlining and cost cutting,” he said.

The only division of Time Warner to post revenue growth was its cable networks. Revenue there rose to $2.87 billion, from $2.73 billion in the quarter a year ago. Operating income rose to $938 million from $909 million.

Time Warner confirmed that it would take a $100 million restructuring charge to lay off hundreds of workers at Time Inc., which publishes titles like Time, Sports Illustrated, People and Fortune. Also Tuesday, the company said it would close Fortune Small Business, which is produced by Time Inc. but owned by American Express. In the quarter, Time Inc.’s revenue declined 18 percent to $914 million, while its operating income declined 40 percent, to $97 million, from last year’s third quarter.

Advertising revenue declined by $129 million, or 22 percent, while subscriptions declined 13 percent, to $49 million.

Mr. Bewkes said he believed much of the downturn in magazine advertising a result of the recession rather than permanent shifts of readers turning away from print and toward the Internet. This view runs counter to that of many others who believe that print is on a steady decline and will never return to the growth it once enjoyed.

No comments:

Post a Comment