Cable nets, digital drives drive Time Warner profit surge

Bewkes' focus turns to new platforms, international expansion

With big executive hiring decisions behind him, Time Warner topper Jeff Bewkes is refocusing his attention on driving growth by leveraging its content on new platforms and pouncing on international opportunities.

During TW’s fourth quarter earnings call on Wednesday, execs talked up the continued growth of HBO Go, UltraViolet, TV Everywhere options and the $350 million in SVOD revenue that the conglom generated last year as signs that Bewkes’ content-focused strategy is paying off. CFO John Martin emphasized that some 85% of TW’s profits are “tied to the TV ecosystem, which is extremely healthy both here and around the world.”

For the quarter, Time Warner saw profit surge 50% to $1.17 billion as strength in TV networks and lower movie costs more than offset a dip in publishing. Revenue was flat at $8.2 billion.

The market liked the numbers and Time Warner’s plan to buy back another $4 billion worth of stock, pushing the shares up sharply in a down market to a new 52-week high. It closed up 4.10% at $52.01.

Bewkes sang the praises of newly anointed Warner Bros. chief Kevin Tsujihara but skirted a question on whether the two other top studio execs who were passed over for Barry Meyer’s job would opt to stay or go.

“Kevin is going to be a great leader at Warner. I chose him because he’s got the greatest breadth and depth across Warner’s businesses. I think he’s going to do a great job bringing together the TV group … the theatrical group … our digital and homevideo business … and consumer products,” Bewkes said. “Kevin is very thoughtful about the future of the studio business.”

He had kind words for Warner Bros. TV Group prexy Bruce Rosenblum and Warner Bros. Pictures head Jeff Robinov, who were also in the running to replace Barry Meyer as chairman-CEO. But he noted that they “have really strong benches of people operating beneath them as well.”

CNN, which has long struggled to compete with its U.S. all-news competitors, is now being aggressively overhauled by Jeff Zucker, who was recruited to lead CNN Worldwide in November. “Under the new leadership we’ve announced, CNN will once again fulfill the promise of its iconic brand,” Bewkes promised.

Asked about the prospect of Warner Bros. renewing a deal that expires at year’s end with Thomas Tull’s Legendary Pictures — the shingle behind upcoming “Man of Steel” — Bewkes said, “We are all very close to Thomas, we have a great relationship. No, there is no contention. There is problem-solving going on.” He said Warner Bros. is “confident about our ability to generate a slate of films regardless of our relationship with Legendary.”

Film studio revenue slipped 4% to $3.7 billion on tough comps from the year-earlier homevideo release of “Harry Potter and the Deathly Hallows: Part 2” and vidgame “Batman: Arkham City” offset partly by the theatrical perfs of “The Hobbit: An Unexpected Journey” and “Argo.”

But studio profit jumped nearly 30% to $552 million on the timing of theatrical releases, lower print and advertising expenses and the mix of television product, TW said.

The Turner nets and HBO saw quarterly revenue rise 5% to $3.7 billion. Subscription sales grew 7% on higher domestic rates, a bump in HBO’s domestic subscribers and international growth. Advertising revenue rose 3% at Turner on higher pricing, more NBA games and big ratings at CNN for the presidential elections, partly offset by the shutdown of Turner’s biz in Turkey and India.

International expansion remains a big priority for the Turner nets. Last year, Time Warner surprised the TV biz by luring away RTL topper Gerhard Zeiler to lead TBS Intl.

“Turner is focused on increasing its scale in each of its targeted territories, including investing more in local production and securing distribution from new networks in countries where we already have a presence,” Bewkes said. “We’re also looking to significantly streamline our operations in areas where we don’t have scale like Western Europe.”

Overall, TW networks’ profits surged 21% to $1.4 billion on higher sales and lower programming expenses.

Bewkes has been the industry champion of TV Everywhere, which he knows started slow but said is ramping up and will see “much greater consumer awareness and usage starting this year.”

And HBO was such a tremendous growth story last year that Bewkes allowed himself some gracious words for the company he once compared to the Albanian army.

“I feel great about how HBO is going; now let’s go over and give a little credit to Netflix. I think they’re doing a great job,” he said. “If you talk about original programming, HBO has always operated in a competitive environment. Netflix has a new original that’s pretty good, ‘House of Cards.’ I think that’s great. It will take a while for that to turn into — what’s HBO up to? Ten hits? I think it’s good, it reminds people of the choice they have of shows of demand. What HBO’s been doing for 20 years and Netflix is now joining.”

The biggest question mark among Time Warner divisions remains the Time Inc. publishing unit, which began implementing layoffs of about 500 staffers, or 5% of its workforce, earlier this month.

For the quarter, Time Inc. revenue fell 7% to $967 million. Profit eased 3% to $200 million. The publisher will take a $60 million charge in the current first quarter for the layoffs.