TW’s Bewkes Touts Content Ops Even With Lower Profit

NEW YORK Time Warner chairman and CEO Jeff Bewkes on Wednesday once again touted his company’s core content operations, which helped the conglomerate post better-than-expected second-quarter results.

Overall, TW posted a lower profit that exceeded Wall Street estimates. Despite weaker advertising and DVD sales, the conglomerate’s TV and film units boosted their earnings. But lower results at AOL, which the company said is on track to be spun off by year’s end, and the Time Inc. publishing unit weighed on the bottom line.

“We are the finest of the major media companies,” Bewkes said in TW’s earnings conference call, arguing the company has content scale, competitive advantages and the best track record. “It is possible to institutionalize success” in what is seen as a hit-driven business, he added specifically about the film business.

As latest examples of strength here he mentioned that Harry Potter has now become the biggest film franchise in history and The Hangover just became the highest-grossing R-rated comedy ever, topping the company’s own previous record holder Wedding Crashers.

Overall, TW recorded a $519 million profit for the second quarter. That was down 34 percent from the $792 million for the year-ago period, or 8 percent from the $564 million when excluding Time Warner Cable, which after a recent spin-off is now a separate company. Revenue fell 9 percent to $6.81 billion.

Based on the results, TW affirmed its full-year earnings targets.

Its core content division, which excludes AOL, saw adjusted operating profit before depreciation and amortization rise 4 percent. For the company overall, that metric fell 2 percent to $1.57 billion.

Film unit earnings jumped 52 percent despite a 9 percent revenue decline.

TW CFO John Martin said Warner should grow its bottom line this year despite a weaker DVD market.
Asked about possible acquisitions of film operations that would add to TW’s strength in specific genres — a hidden reference to market chatter that TW has been mulling a bid for DreamWorks Animation — Bewkes said: “We don’t need to expand into any particular genre.” But he said TW is always looking at potential deals if they make financial sense.   

TW’s TV unit posted a 17 percent profit gain on a 4.8 percent revenue gain despite a 3 percent ad decline.
Asked about the upfront advertising market, Bewkes said it is “not quite over.” He promised the firm’s Turner networks would take share from the broadcast networks and be “on top of the heap” in total dollar and pricing terms in the upfront.

Overall, industry-wide dollars will be down in the upfront, but advertisers will come back in the scatter market, Bewkes predicted. “It could make the upfront a little less of an indicator for the health of the ad market than it usually is,” he said.

Discussing overall ad market trends, he said advertisers are holding on to budgets longer, which reduces visibility. CFO Martin added that the kids TV market is currently seeing “some softness.”

With second-quarter figures better than expected in part due to a more stable ad environment for Turner, Martin said the current third quarter now looks like the toughest one for TW in terms of year-over-year comparisons.

Bewkes also got some questions on Wednesday’s call about the home entertainment market, and the CEO expressed overall optimism despite a maturing DVD market and the recession.

He said that looking at the whole category, including electronic sell-through, consumer spending was down 4 percent in the second quarter, for example, after a 5 percent decline in the first quarter, and blockbuster titles are still doing well.