Time Warner Profit Tops Analyst Estimates on Cable-TV Gains

Time Warner Inc., the media company that owns HBO and the Batman film franchise, reported third-quarter profit that topped analysts’ estimates after making gains in cable-network revenue.

Net income rose to $838 million, or 86 cents a share, from $822 million, or 78 cents, a year earlier, the New York-based company said today in a statement. That beat the 82 cents analysts had projected, according to data compiled by Bloomberg.

Time Warner, led by Chief Executive Officer Jeffrey Bewkes, saw an increase in the money that cable-TV providers pay to air its networks. The fees rose 7 percent last quarter, offsetting a 1 percent drop in cable advertising revenue. Bewkes, who took over in 2008, has refocused the company on premium programming such as HBO’s original series “Boardwalk Empire,” helping make its networks more attractive.

“The quarter looked better than expected,” said Matthew Harrigan, an analyst with Wunderlich Securities Inc. in Denver. Cost cutting also helped bolster profit, he said.

Time Warner rose 4.2 percent to $44.91 in New York at the close, the biggest one-day gain in almost a year. The stock climbed 24 percent this year.

Bewkes has developed services that let HBO subscribers watch the channel on tablets and other mobile devices, and he’s made bets on live sports programming. Last month Time Warner renewed a rights agreement with Major League Baseball to broadcast games through the 2021 season.

HBO’s Allure

“In a time when the market for content consumption is increasingly fragmented and live TV ratings are falling, we believe a network like HBO that has top quality original programming and an integrated digital strategy will be more resilient -- and valuable -- than networks with mostly syndicated content,” Anthony DiClemente, an analyst with Barclays Plc in New York, said in a research note before the earnings report.

Time Warner’s strategy should help increase its pay-TV fees by as much as 10 percent by 2014, DiClemente said in his report. Still, ratings suffered last quarter. The company had a 10 percent decline in viewership at its cable networks in the period, DiClemente said. The popularity of the London Olympics, which benefited Comcast Corp.’s NBC, hurt other networks.

Netflix Deal

CNN, a victim of the ratings slump, has seen recent audience gains due to election coverage, Bewkes said on an analyst call. He also expects to name a successor to outgoing CNN President Jim Walton by the end of the year.

Total revenue from its cable networks increased 4.1 percent to $3.34 billion last quarter, compared with declines at the company’s film and TV studios and publishing business. Overall sales dropped 3.2 percent to $6.84 billion in the period. Analysts had forecast $6.91 billion on average, according to data compiled by Bloomberg.

The company revealed more data on its deals with streaming video providers such as Netflix Inc. and Amazon.com Inc. Time Warner took in more than $250 million this year selling streaming rights to its television and movie content, with two-thirds of that sum coming directly from Netflix.

Revenue at the film and TV studios -- which released the final movie in the Batman franchise, “The Dark Knight Rises,” in July -- fell 12 percent to $2.9 billion. While the “Dark Knight” film drew more than $1 billion in global box-office receipts, the studio division had lower sales than a year earlier when it benefited from the final Harry Potter film.

Publishing Business

Revenue from Time Inc., the publisher of People and Sports Illustrated, dropped 5.7 percent to $838 million. Laura Lang, the division’s chief executive, is forging a plan to unify its long-sparring online and print fiefdoms -- a move that would ease the selling of advertising across print titles, the Web and mobile devices.

The company also reaffirmed its 2012 full-year outlook. Excluding some items, the percentage growth in adjusted net income should grow in “the low double digits,” compared with $2.89 a share in 2011.

“All in all, a really productive quarter for us,” Bewkes told analysts. “It’s another indication that the plan we put in place five years ago is working.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE