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Time Warner reports $16 billion loss

Revenue down 3% to $12.3 billion

Time Warner, still saddled with troubled assets such as cable systems, print publishing and AOL, reported a net loss of $16 billion for the fourth quarter Wednesday.

That compares with a $1 billion profit in the year-earlier period.

The source of the massive hit was a $24.2 billion writedown of the value of franchise agreements belonging to Time Warner Cable (of which it owns 84%) and the decline of certain Time Inc. and AOL assets.

Revenue on the film side in the quarter ended Dec. 31 dropped 11% to $3.1 billion but operating profit rose 6% due to a reduced release output and a higher B.O. batting average.

The quarter’s theatrical titles, such as “Gran Torino,” “Four Christmases” and “Yes Man,” were roughly even with the year-earlier crop of “I Am Legend,” “Fred Claus” and “”The Golden Compass.”

On the homevid front, even a juggernaut such as “The Dark Knight” suffered due to overall DVD softness, which execs said will linger as long as overall retail numbers are down. In a dramatic illustration of the decay of the DVD market, execs said sales of TV titles declined 24%.

The conglom already prepared Wall Streeters for the big fourth quarter loss in January, when it announcing the $24.2 billion writedown. In revised guidance issued along with the results Wednesday, execs forecast flat results for 2009 compared with 2008, with three straight quarters of earnings decline followed by a final quarter of growth.

Chief financial officer John Martin noted that all forecasts to date have not taken into account plans to effect a reverse stock split upon completion of the cable separation.

Time Warner said a planned decoupling from Time Warner Cable and a disposition of its stake was proceeding and should close some time in the current quarter. That transaction will net $9.25 billion in a one-time dividend and prevent future writedowns as cablers face intense pressure due to the country’s real estate and economic woes.

Shares edged down almost 4% to close at $9.42 — above the 52-week low of $7 but far from the $16 levels of last summer.

Total revenue eased down 3% to $12.3 billion.

While it presented a few upbeat stats reflecting growth in the film and TV arenas, Time Warner is the latest in a gloomy parade of media companies reporting results. Disney’s numbers disappointed Wall Street on Tuesday, and expectations are that News Corp. will undershoot estimates Thursday due to its reliance on rapidly deteriorating sectors such as local TV stations and newspapers.

During a conference call with analysts to discuss the results, chief exec Jeff Bewkes adopted a slightly more resolute tone than some of his industry peers. “The economy clearly affected some of our businesses” in 2008, he said. “But we achieved most of what we set out to do. In 2009, we intend to build on what we accomplished.”

AOL, after all these years, remains Time Warner’s main strategic conundrum and an undeniable financial drain. Its revenue dropped 23% to $968 million in the period, largely due to an 18% drop in online ad revenue.

Under Bewkes, Time Warner has explored a range of options for AOL and has initiated a split of its subscription-driven access business from its ad-supported content biz.

Still, its position in the Web hierarchy is such that Time Warner conceded that Google plans to sell the 5% stake in AOL it acquired for $1 billion in 2006; that could end the seven-year relationship between the companies.

Publishing is similarly challenged. Time Inc.’s revenue slid 13% to $1.3 billion thanks to an eye-popping 20% decline in ad sales.

Cable nets were a bright spot, posting a 9% revenue spike to $2.9 billion. Advertising revenue rose 7% due to higher CPMs and ratings, political ad spending on CNN and the addition of baseball playoff broadcasts on TBS.

Operating net income dropped 20% in cable but that was largely due to $280 million set aside by Turner to deal with litigation involving the sale of sports teams and also the bankruptcy of Lehman Brothers (a key Time Warner Center building tenant in New York). Without those items, operating profit would have gone up 7%.

Current scatter ad revenue is expected to be flat with the prior-year quarter, said Martin, “which wouldn’t be a bad result” in this economy.

In terms of TV production, execs pointed to Warner Bros. TV’s output of top-rated shows and HBO’s record spree of pilot production, elements that will further the company’s newly refined goal of being a content-focused giant.

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