NEW YORK Time Warner today disclosed a 14.3 percent decline in first-quarter profit, as the media conglomerate’s AOL and publishing divisions continued to weather a deteriorating advertising market.
For the three-month period ended March 31, Time Warner reported net income of $661 million, or 55 cents per share, down from the year-ago result of $771 million, or 64 cents per share.
AOL and Time Inc. suffered the most precipitous declines, as both units saw revenue drop 23 percent. AOL’s total sales fell to $867 million, down from $1.13 billion, subscription revenues dropped 27 percent ($146 million) and advertising dollars were off $109 million, or 20 percent, to $443 million.
In a 10-Q filing with the Securities and Exchange Commission, the media giant said it “currently anticipates that it would initiate a process to spin off one or more parts of the businesses of AOL to Time Warner’s stockholders, in one or a series of transactions.” The filing went on to note that a spin-off would be contingent on a number of factors, including “future market conditions or the availability of more favorable strategic opportunities that may arise.”
Publishing revenue fell to $806 million, down from $1.05 billion in the prior-year period. Time Inc. ad revenues declined by $167 million, or 30 percent, to $383 million, while subscription revenues fell 16 percent to $307 million.
The powerhouse networks division, which includes the Turner Broadcasting cable nets and HBO, boosted revenue 5.6 percent to $2.81 billion. A 9 percent lift in subscription revenue offset a 2.2 percent drop in ad sales. The networks brought in $723 million in ad sales dollars on the quarter, down from $739 million one year ago.
Time Warner noted that ad declines reflected a shortfall at Turner’s international networks, “due in part to the impact of unfavorable foreign exchange rates,” as well as “a slight decline at its domestic entertainment networks, reflecting weakened demand.”
With respect to the remainder of the year, Time Warner noted that ad revenue growth at the networks arm “will continue to be challenging due to the difficult economic environment.”
Time Warner chairman and CEO Jeff Bewkes told investors that the Turner entertainment nets, which include TNT, TBS and Cartoon Network, are in “a very good position” on the eve of the upfront, noting that the cable brands enjoy competitive advantages in terms of “scale, reach, ratings and quality programming.” Bewkes also indicated that the CPM gap was narrowing, saying that top-tier cable nets now command unit pricing at about two-thirds the going rate for broadcast inventory.
In a statement released before Time Warner’s Wednesday morning earnings call, Bewkes said the quarterly results keep the company “firmly on track to achieve our full-year business outlook.” He added that Time Warner is “working to determine the right ownership structure for AOL.”
In early trading, Time Warner shares were up $1.47, or 6.6 percent, to $23.24.