Time Warner profits fell 34% last quarter to $519 million, largely on the spinoff of the cable business that has created a slimmed-down company increasingly focused on content.
Revenue was down 9% to $6.8 billion as declines in publishing, AOL and filmed entertainment offset gains in media networks.
Excluding Time Warner Cable, which was unloaded early this year, earnings were down only 8% as the media giant benefited in part from lower overhead costs and other savings.
The numbers were better than expected, and Time Warner stock popped higher in early trading before settling lower in a generally down market, closing down 1.8% at $26.52.
Chairman-CEO Jeff Bewkes said Time Warner is on track to spin off AOL to shareholders around the end of the year.
Networks, led by Turner Broadcasting and HBO, saw profit rise 17% to $875 million, representing the lion’s share of gross profit for Time Warner’s content business.
Revenue nosed up 5% to $3 billion. Of that, subscription revenue rose 8% and advertising revenue dipped 3%. Bewkes said a small but welcome uptick in domestic advertising was wiped out by soft ad revenue from international channels.
He said the upfront is not quite over, but when it is, he expects to have taken share from the broadcast networks. He thinks overall dollars going into the upfront will be down a bit from last year as clients hold back, seeking flexibility in an uncertain economy.
Media execs have all noted the increasing tendency of advertisers to wait until the last minute to jump onboard, making visibility tough for the networks.
But they will jump, Bewkes said.
“We think they will come back in scatter, and we see in discussions that clients are aware they will have to pay a little for that flexibility,” he said during a conference call.
That shift, however, “makes the upfront a little less of an indicator of the health of the industry than it usually is,” he added.
In filmed entertainment, lower overhead costs after several waves of restructuring and lower P&A expenses helped profit surge 52% to $143 million.
Revenue declined 9% to $2.3 billion as soft DVD sales weighed on results despite a stronger release slate driven by surprise hit “The Hangover.” The company also cited lower television license fees from theatrical product and tough comparisons at the videogame biz as “Lego: Indiana Jones” was a big seller in the year-earlier quarter.
Bewkes said the best titles are still performing well on DVD, and consumer spending overall is improving. Still, he acknowledged, the market is soft. “We are seeing some shift to rental, and we’re monitoring it closely,” he said.
Generally, Warner Bros. is having a wicked run. “Harry Potter and the Half-Blood Prince” almost hit $400 million its first five days in theaters and is the most successful franchise in film history, Bewkes said.
The studio has 26 shows on network schedules — 12 new, 14 returning — and has been the top provider of programming for 18 of the past 23 years.
“We have shown it’s possible to institutionalize success even in a hit- driven business,” Bewkes said.
Asked about possible acquisitions on the film side, he said, “Since Warner is the largest studio, we don’t need to expand into any additional genre. Having said that, if we see the opportunity to expand and acquire new capability, we would consider it.”
He didn’t name names but said there are some usual suspects “that float around.”
There’s been speculation that Time Warner may be interested in buying DreamWorks Animation.
Asked about that possibility Tuesday, DWA chief exec Jeffrey Katzenberg declined to comment.
In the struggling publishing biz, led by Time Inc., profit plunged 53% to $102 million.
Revenue for the stable of magazines dropped 22% to $915 million. Ad revenue was off 26%, and subscription revenue fell 18%. Bewkes said there are signs that advertising is stabilizing, and recent weeks have seen a glimmer of hope in the form of an uptick in subscription renewals.
Time Warner has sold a handful of publications and revamped the division several times. But some industryites and Wall Streeters believe publishing may be the next business on the block after the sale of Time Warner Cable and the upcoming spinoff of AOL.
The Netco reported a 24% drop in revenue to $804 billion.
Profit decreased 28% to $165 million.
Earlier this month, Time Warner bought back Google’s 5% stake in AOL for $283 million in a move to simplify the spinoff. Bewkes said necessary paperwork has been filed with the SEC ahead of the operation, which is likely by year’s end.
Excluding both Time Warner Cable and AOL from the financial results, operating profit for the pure content businesses was up 4%.
Time Warner also said it had restarted its stock buyback program this quarter. And the company reaffirmed its business outlook for full-year 2009.