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A healthy Time Warner plans to spend

Revenue, profits up in 2010 on ad boost, HBO DVD sales

Jeff Bewkes is bullish on Time Warner’s prospects for 2011 thanks to the headwind provided by the conglom’s strong revenue and earnings growth last year.

As a result, the company plans to “ramp up investment in programming, production and marketing even more than we did last year” at Warner Bros., the Turner nets and HBO, the Time Warner topper said as he discussed the conglom’s fourth quarter and full-year results on Wednesday.

For Warner Bros., in particular, that means more tentpole pics and more TV programming, particularly comedies and cable series, with Bewkes saying event films have proved “more consistently profitable” for the studio than smaller movies.

With a slate of tentpole pics — ranging from superhero actioner “Green Lantern” to the final “Harry Potter” title and “The Hangover Part 2” — and a windfall of syndication revenue from “The Big Bang Theory” coming in, Warner Bros. should be on track to have its highest profit year ever, Time Warner chief financial officer John Martin said.

Already skedded for next year are the latest installment in the Batman franchise, “The Dark Knight Rises”; a reboot of the Superman franchise; the first “Hobbit” pic; a sequel to “Clash of the Titans”; and the return of “Godzilla.”

A stronger-than-expected increase in advertising dollars from marketers and the sale of HBO programming like miniseries “The Pacific” and “Entourage” on DVD and in syndication helped bolster Time Warner’s financials in 2010, with revenues up 6% to $26.9 billion and net profits rising 4% to $2.57 billion, the company announced before the market opened Wednesday.

During the fourth quarter, revenues rose 8% to $7.8 billion and net profits by 22% to $769 million.

Solid results from original programming at Turner and HBO and from box office at Warner Bros. remained the bright spots for the conglom, which Bewkes has converted over the past few years into a pure content company.

While followers of the media business continue to watch ad spending closely, the rebound showed no signs of fading at Time Warner. Overall, revenues grew by 10% — rising 14% at Turner and 3% at Time Inc. in 2010.

The strong earnings pushed Time Warner stock up $2.79, or 8.6%, in trading Wednesday to close at $35.10.

On a call with analysts, Bewkes noted that Turner’s domestic cablers “grew ad revenue in the high teens organically” in 2010. He noted that at last year’s upfront, Turner’s CPM growth rate “exceeded all the broadcast networks,” providing “tangible evidence that the CPM gap has narrowed.”

“In 2011, we’re even more confident about how we’re positioned, and we’ll be even more aggressive,” Bewkes said. “We’ll increase our investments in programming, production and marketing even more than we did last year. We’ll keep pushing to accelerate new digital business models. We’ll keep expanding our presence in the most attractive international territories.”

The investment in top-flight programming ranging from the NCAA men’s basketball tourney to Conan O’Brien’s new talker will continue to pay off, Bewkes said. “We’re confident we’ll post strong advertising growth again this year.”

After repurchasing $3 billion in shares last year, Time Warner plans to buy back another $5 billion in shares this year. At the same time, it boosted its dividend by 11% to 23.5¢ a share.

Time Warner is still struggling with its Time Inc. publishing unit, however, where a 3% increase in ad revenue (to $57 million) last year was offset by a decrease in subscription and other revenues, partly due to weak newsstand sales.

For the film division, homevideo revenues took a dip in 2010 but face difficult comparisons because of the success of “Harry Potter and the Half-Blood Prince” on DVD in 2009.

(Marc Graser contributed to this report.)

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