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Time Warner posts boffo third quarter

Warner Bros. films, TV licensing fees boost bottom line

Harry Potter’s swan song and the geeks of “The Big Bang Theory” powered Warner Bros. to its strongest quarter ever, Time Warner chief exec Jeffrey Bewkes touted as the conglom reported socko third-quarter earnings Wednesday.

Time Warner revenue jumped 11% to $7.1 billion last quarter, reflecting its highest growth rate since the third quarter of 2007.

Net profit surged to $822 million from $52 million. Studio revenue grew 19% to $3.3 billion led by the strong theatrical performance of “Harry Potter and the Deathly Hallows: Part 2,” which took in $1.3 billion at the worldwide B.O., and syndie license fees from the off-network debut of CBS hit “Big Bang.”

Studio operating income jumped 162% to $524 million on higher revenue, lower film valuation adjustments and lower pre-release advertising expenses. The strong perf prompted the conglom to boost its estimate for full-year earnings per share to growth in the “high-teens.”

The final installment of the Harry Potter franchise brought the total B.O. take for the eight films in the series to a staggering $7.7 billion, which Bewkes called a sign of Warner Bros.’ “unequaled ability to create and manage film franchises.” On top of “Deathly Hallows,” Bewkes mentioned the solid B.O. perf of “Contagion” and “Horrible Bosses.”

Bewkes also stressed Time Warner’s commitment to exploring new platforms to keep its core content businesses vital. Last month, Warner Home Video released its first two movies with UltraViolet-enabled digital copies, “Horrible Bosses” and “Green Lantern.”

Consumers can access these pics and others as they come up on multiple platforms through Warner Bros.-owned Flixster, and going forward through a growing number of digital stores and devices that support UltraViolet.

Other highlights during the quarter include a licensing pact with Netflix worth “hundreds of millions” to Warner Bros. TV, according to Time Warner chief financial officer John Martin, by granting streaming rights to CW series through the 2014-15 season, albeit with a one-season delay for new episodes. The CW also set a five-year licensing agreement with Hulu last week for the rights to stream in-season episodes of its programming on Hulu Plus paid service and Hulu’s free ad-supported service.

Bewkes said he also expects the TV Everywhere authentication initiative that he has championed to make Turner and HBO programming available online in 80 million households by the end of the year. “We’re getting it up and running technically now, increasingly awareness and making it easier to use for consumers,” he said.

As “Big Bang” is poised to churn out profits for the studio, the future pipeline of shows is also looking strong as Warner Bros. TV is home to promising laffers “Mike and Molly,” “2 Broke Girls” and “Suburgatory.”

“With all the changes in TV, the holy grail of TV production is still a hit 30-minute comedy,” Bewkes said.

On the network side, revenue from Turner Broadcasting cablers and HBO rose 7% to $3.2 billion. Subscription revenue rose 6% and advertising revenue jumped 9%.

Operating income slipped by 4% on higher sports and entertainment programming costs — up 11% — and marketing costs.

Highlights include TNT’s ”Falling Skies,” which the company said ranked as basic cable’s highest-rated new series during the quarter. CNN viewership was up nearly 50% year-on-year among adults 25-54 in primetime.

Time Inc. publishing, revenue was about flat at $889 million, reflecting flat subscription revenue and a 3% dip in advertising revenues — partly due to the transfer of management of SI.com and Golf.com to Turner in the fourth quarter of 2010.

Time Inc. operating income fell 12% to $124 million on lower revenue and higher expenses, including increased paper costs.

During the first nine months of 2011, Time Inc. maintained its 21.1% leading share of the overall domestic magazine market.

Time Warner also said it had repurchased $3.7 billion worth of shares year to date.

Despite the strong earnings, announced before the markets opened, Time Warner shares dipped 27¢ Wednesday to close at $33.57.

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