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Time Warner’s profit plunge

Film studio leads, but AOL still bleeds

Media giant Time Warner said Wednesday that its profit was halved to $1.1 billion last quarter as AOL continued to bleed subs, and with figures for the year-earlier period inflated by hefty one-time gains.

Revenue grew 9% to $11.7 billion.

The studio had a blowout three months and will stay strong through year’s end, execs said on a conference call — the first since news this week that Jeffrey Bewkes will assume control of day-to-day operations as CEO starting Jan. 1.

Asked about differences between himself and current chairman-CEO Richard Parsons, Bewkes said, “I really don’t have an answer to that question.”

He’s “smarter than I am,” joked Parsons, who will continue as chairman.

Wall Street thinks Bewkes is more likely than Parsons has been to take dramatic action, such as splitting up TW or selling pieces to boost the flagging stock price.

Bewkes said the company is, as always, considering strategies, but “we’re not going to telegraph it in advance.”

“This company has to move fast. The business is going digital; it’s going global. We have to adapt,” he added. “It requires a lot of trial and error, healthy debate, quick movement and the ability to change course.”

Studio profits more than doubled to $268 million.

Revenue surged 33% to $3.2 billion on worldwide theatrical coin from Warner Bros.’ “Harry Potter and the Order of the Phoenix” and “Ocean’s Thirteen,” and New Line’s “Rush Hour 3” and “Hairspray” — along with boffo homevideo sales of “300.” TW also cited higher TV licensing fees from off-network sales of “Two and a Half Men,” “Cold Case” and “The George Lopez Show.”

At the networks, profit rose 24% to $681 million.

Revenue growth of 6% to $2.6 billion was constrained in part by the shuttering of the WB network in September 2006.

Turner cablers saw ad revenue rise 10%. Total subscription revenue rose 7%. Ancillary sales of HBO’s “The Sopranos” also padded profits.

Execs didn’t mention — and analysts on the call didn’t ask about — the writers strike, which many in showbiz fear could be prolonged and take a heavy toll on the entertainment industry.

At AOL, revenue was down 38% to $1.2 billion. Profit for the unit fell 24% to $295 million. The drop was due in part to the sale of AOL’s U.K. biz and in part to subscribers continuing to drop the paid service. AOL lost 851,000 subs from the previous quarter and 5.1 million from the year-earlier period.

Ad revenue rose 13%. Netco aims to ultimately make advertising, not subscriptions, its key revenue driver. To that end it’s pursued a series of acquisitions, announcing Thursday that it’s buying Internet advertising company Quigo.

At Time Warner Cable, now a stand-alone public company, revenue rose 25% to $4 billion in part because of the acquisition of additional systems from Adelphia and Comcast. Profit was up 24% to $681 million.

Sales grew 21% in video, 26% in high-speed data and 57% in voice.

The cabler, like most of its peers, is aggressively rolling out a so-called triple-play package of video, high-speed Internet and telephone. TWC said nearly half its customers subscribe to two or more services.

TWC had 13.3 million basic video subs at the end of the quarter, down by 83,000 from the year before.

Time Warner sold a small stake in Time Warner Cable when it took the company public, and some Wall Streeters would like to see the company sell more or unload the division altogether. Parsons said TW could take some action if the heavy investment needed to transform the cable subsid into a “a fully robust telecommunications company” proves too costly for the parent’s taste.

Parsons sees continued consolidation in the cable biz and reminded everyone that TWC has a currency to do deals. It’s long been eyeing Cablevision’s systems, which may be back in play after that cabler’s founding Dolan family failed in its latest bid to take the company private.

As for acquisitions in general, Bewkes said Time Warner looks at “anything that improves our strategic position versus our competitors.”

At publisher Time Inc., sales were flat at $1.2 billion. Profits rose 15% to $251 million.

Ad revenue gained at Internet sites led by People.com and CNNMoney.com — offset by a dip in print revenue due partly to the impact of closing Teen People and Life, as well as the sale of some other properties.

Time Warner said that, as of Monday, the company had repurchased $2.2 billion worth of stock — part of the $5 billion buyback program Parsons launched last year to boost the share price.

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