Basketball, ad revenues boost networks
The NCAA men’s basketball tourney gave a big top-line boost to Time Warner in the first quarter. On the bottom line, not so much.Revenues announced on Wednesday were up 6% to $6.7 billion, helped by a 31% gain in advertising revenues at the company’s networks division, which includes TBS, TNT and TruTV on which the games were shown. Viewership in the quarter on those nets was up 40% versus the first quarter last year, said Time Warner chief Jeff Bewkes. Yet Time Warner’s net profits dipped 10% to $653 million, in part because a big chunk of the costs for the NCAA tourney package were recognized in the quarter. Turner and CBS share the rights to the tournament through a $11 billion, 14-year deal announced last year. Execs acknowledged that the company would lose money on the NCAA over the first few years of the deal. But Bewkes said eventually there will be a big upside for Time Warner, in terms of receiving higher affiliate fees at Turner and higher ad rates. “This will be a profitable deal over time,” Bewkes said. TW chief financial officer John Martin pointed out that as the deal progresses Turner will be able to air more games, eventually airing two-thirds of the tournament. Bewkes said he hasn’t been deterred from bidding for other sports rights, but we are “focused on having the right sports.” Overall, revenues at the networks division were up 18%, helped, in addition to the NCAA, by the sales of HBO programming “The Pacific,” “Sex and the City,” and “Boardwalk Empire.” Subscription revenues rose 9% and content revenues by 48%. Bewkes touted CNN’s performance in the quarter, during which prime time ratings were up 30%, as dramatic news events in Japan and the Middle East unfolded. The quarter “was a testament to the critical role (CNN) plays in the U.S. and around the globe,” Bewkes said. Revenues at the film division fell 3% to $2.6 billion, facing tough comparisons to 2010 when “The Blind Slide” and “Sherlock Holmes” scored at the B.O. Bewkes said the film slate will pick up in the second quarter with the release of “The Hangover 2” and “Green Lantern.” At Time Inc., revenues were flat at about $798 million, largely because Sports Illustrated’s SI.com and Golf.com were transferred to Turner Sports. In response to a report this week from BTIG analyst Rich Greenfield calling for Time Warner to spin off HBO because he felt the pay cabler was being held back inside the larger media company, Bewkes said “it doesn’t make any sense to spin HBO…It aligns really well with the scale of our other networks.” He added that HBO has more value inside of Time Warner, and its recent HBO GO, iPad, iPhone and Android app will be a model for other TV Everywhere initiatives. As for the upcoming upfront season, Bewkes predicted that ad pricing at the Turner nets’ “will be at the top of end of the industry range, for cable and broadcasting.”Time Warner bought back $1 billion in stock in the quarter, and paid $260 million in dividends.