Time Warner Sales Disappoint as NCAA Schedule Hurts Ads

Time Warner Inc., owner of cable networks TNT and HBO, posted first-quarter sales that missed estimates as advertising dropped in part because of a later schedule for college basketball’s biggest event.

Revenue slid less than 1 percent from a year earlier to $6.93 billion, Time Warner said today, below the $7.12 billion average estimate of 25 analysts compiled by Bloomberg. The National Collegiate Athletic Association tournament extended later into the second quarter than it typically does, with the championship game on April 8, dragging TV ad revenue down 1 percent to $1.08 billion compared to a year earlier, when it was held on April 2.

Chief Executive Officer Jeffrey Bewkes has focused the company’s growth strategy on its TV business, which accounts for more than 70 percent of Time Warner’s sales. He announced plans in March to spin off magazine publisher Time Inc. -- the company’s worst-performing division -- after unsuccessful talks to merge the unit with Meredith Corp., publisher of women’s titles including Ladies’ Home Journal.

Shares in the company decreased less than 1 percent to $59.48 at the close in New York. The stock has climbed 24 percent this year.

‘Thrones’ Spending

Bewkes has favored spending money developing shows such as HBO’s “Game of Thrones,” or getting rights to sports programming, such as the NCAA tournament, to command higher fees from pay-TV providers and draw higher advertising revenue.

Excluding some items, first-quarter profit was 82 cents a share, surpassing the 74 cents analysts predicted on average, according to data compiled by Bloomberg. Affiliate fees from the pay-TV companies gained 5 percent, helping total revenue in the cable-network unit rise by 2.6 percent to $3.7 billion.

Time Warner’s net income increased to $720 million, or 75 cents a share, from $583 million, or 59 cents, a year earlier, the company said.

The Warner Bros. division’s sales declined 4 percent to $2.7 billion on lower box-office business and TV-licensing revenue. Time Inc.’s sales dropped about 5 percent to $737 million.

The company boosted its dividend in the quarter 11 percent to almost 29 cents a share. A stock buyback program started in January will be worth as much as $4 billion.

Returning Cash

Those moves will return cash to investors as the company waits to renegotiate rights fees with pay-TV systems later this year. The company said today on a conference call it expects to draw more fees from online video providers such as Netflix Inc. than the $350 million it received last year.

Ratings at Time Warner’s ad-supported cable networks, including CNN, TNT and TBS, fell an average of 4.2 percent in the quarter among certain age groups, according to a note from Michael Nathanson, an analyst with Nomura Holdings Inc. in New York. He has a neutral rating on the shares.

For 2013, Time Warner reiterated that earnings will grow at a rate in the “low double digits” from $3.28 a share in 2012, excluding some items. That includes the effect of a $60 million restructuring at Time Inc., the company’s magazine division.

The 60-year-old Bewkes, who has renewed his employment agreement through 2017, reshuffled the company’s executive lineup in the past year to shape up underperforming divisions.

Bewkes installed Jeff Zucker, the 48-year-old former NBC Universal chief, to lead the struggling CNN, and in January he resolved a two-year contest among top executives at Warner Bros. by promoting Kevin Tsujihara, 48, to run the unit.

Also in January, Richard Plepler, 54, took over as CEO of HBO for the departing Bill Nelson. The appointments provide Zucker, Tsujihara and Plepler with high-profile posts that put them in position to compete for Bewkes’s job, should he decide to step down at the end of his term in 2017, when he will be 65 years old.

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