Film and TV were two bright spots in Time Warner’s Q1, which was actually “above expectations” (for what that’s worth). AOL and Time, Inc., collapsed, but consumers and advertisers are still spending freely on the screens. The TV subscription business, meanwhile (consumers and cable fees), continues to kill it.
NETWORKS (Turner Broadcasting & HBO)
Revenues climbed 6% ($149 million) to $2.8 billion, with growth of 9% ($155 million) in Subscription revenues, offset partially by a decline of 2% ($16 million) in Advertising revenues. Subscription revenues benefited primarily from higher rates at both Turner and HBO and the impact of the consolidation of HBO Latin America Group (“HBO LAG”). Advertising revenues decreased, reflecting mainly declines at Turner’s international networks, due in part to the impact of unfavorable foreign exchange rates, and a slight decline at its domestic entertainment networks, reflecting weakened demand.
Operating Income before Depreciation and Amortization grew 11% ($106 million) to $1.1 billion, reflecting mainly increased revenues and lower newsgathering costs, offset partially by higher marketing and programming expenses. Programming expenses increased 2% to $925 million. Programming expenses in the current year and prior year quarters included charges of $5 million and $21 million, respectively, related to decisions not to proceed with certain original programming. Operating Income before Depreciation and Amortization also benefited from the consolidation of HBO LAG.
Operating Income rose 10% ($86 million) to $960 million, resulting primarily from the increase in Operating Income before Depreciation and Amortization, offset partly by increased depreciation ($8 million) and amortization ($12 million) expenses.
Revenues declined 7% ($207 million) to $2.6 billion, reflecting difficult comparisons to the prior year quarter, due primarily to lower DVD sales, driven by fewer home video releases and reduced catalogue sales in the current year quarter, as well as the impact of unfavorable foreign exchange rates and reduced theatrical revenues. The current year quarter included revenues from the theatrical performances of Gran Torino, The Curious Case of Benjamin Button, Yes Man and Watchmen, while revenues in the prior year quarter benefited from the theatrical and home video performance of I Am Legend, as well as the theatrical performances of 10,000 B.C. and The Bucket List. These declines were offset in part by higher television licensing fees, as the prior year quarter was negatively affected by the Writers Guild of America (East and West) strike, as well as higher interactive video game revenues, due mainly to the release of F.E.A.R. 2: Project Origin.
Operating Income before Depreciation and Amortization increased 10% ($28 million) to $308 million, as the impact of lower revenues and higher television production costs, associated with increased network deliveries, were more than offset by lower print and advertising expenses, due primarily to the timing, quantity and mix of titles, as well as reduced restructuring charges ($79 million) and lower overhead costs.
Operating Income increased 17% ($31 million) to $214 million, due mainly to the increase in Operating Income before Depreciation and Amortization.
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