Time Warner Takes Hulu Stake, Posts Mixed Q2 Results

NEW YORK: Time Warner has picked up a 10-percent interest in Hulu, the announcement of which coincided with the release of its quarterly financial results.

Time Warner joins The Walt Disney Company, 21st Century Fox, and Comcast in the joint venture. Turner’s entertainment, sports, news and kids’ networks—including TNT, TBS, CNN, Cartoon Network, Adult Swim, truTV, Boomerang and Turner Classic Movies—will be available live and on-demand on Hulu’s new live-streaming service, which is slated to launch early next year.

Time Warner also revealed the results for its second quarter ended June 30. Revenues were down 5 percent to $7 billion, with a decline at Warner Bros. partially offset by growth at Turner and HBO. Revenues included the unfavorable impact of foreign exchange rates of around $60 million in the quarter. Operating Income decreased 1 percent to $1.8 billion, due to decreases at Warner Bros. and HBO, partially offset by a swing in intersegment eliminations. Adjusted operating income dipped 5 percent to $1.8 billion.

Turner’s revenues were up 6 percent to $3 billion, with an 11-percent hike in subscription revenues and 6-percent gain in ad revenues. There was a decline of 15 percent in content and other revenues, though. Operating income and adjusted operating income were both essentially flat at $1.1 billion, with growth in revenues offset by higher expenses.

At HBO, revenues increased 2 percent to $1.5 billion, with a 6-percent lift in subscription revenues partially offset by a 17-percent decline in content and other. Operating income and adjusted operating income were both down 5 percent to $481 million. Growth in revenues was more than offset by higher expenses.

Warner Bros.’s revenues were down 19 percent to $2.7 billion, as video games, home entertainment and TV licensing revenues were weak. Operating income dipped 10 percent to $308 million, with the decline in revenues being partially offset by lower associated costs of revenues. Adjusted operating income decreased 37 percent to $217 million.

Time Warner has lifted its 2016 full-year outlook, with management now envisioning adjusted earnings per share for 2016 between $5.35 and $5.45

Jeff Bewkes, Time Warner’s chairman and CEO, said: “We had a strong first half of 2016, which puts us ahead of our original goals for the year. Our performance reflects the creative excellence resulting from investments we’ve been making in the very best content. At the same time, we’re capitalizing on new distribution opportunities to take advantage of the growing demand for high-quality video content around the world. As an example of our creative excellence, Time Warner received 148 Primetime Emmy nominations—more than any other company—with HBO’s 94 again setting the pace for the industry. In the second quarter, TNT and TBS finished as the two highest rated ad-supported cable networks in prime time among adults 18 to 49, and Warner Bros. once again came out of the upfront as the leading supplier to broadcast television. Warner Bros. also gained momentum in film with recent successes, such as Central Intelligence and The Conjuring 2, and anticipation is running high for Suicide Squad, which debuts this week.”

Bewkes continued: “Today, we also announced our 10 percent investment in Hulu and that Turner has separately signed an affiliate agreement for its full suite of networks to be carried on Hulu’s live-streaming service slated for launch early next year. These are just the latest examples of our commitment to supporting innovative digital services that allow consumers to access high-quality content however they want it across a variety of platforms. We’re confident the multiple investments we’re making in these types of services position the company to benefit from growing global demand for the strongest network brands and very best video content.”

He added: “Our investment in Hulu underscores Time Warner’s commitment to supporting and developing new platforms for the delivery of high-quality content and great consumer experiences to audiences around the globe.

“We’re also excited to join Hulu’s other owners in launching a new consumer-friendly package featuring leading networks that will deliver more value to audiences and complement Hulu’s core SVOD offerings. The inclusion of Turner’s networks in Hulu’s new streaming service furthers our efforts to allow consumers to engage with and enjoy our brands across a wide range of platforms and services.”

Mike Hopkins, CEO of Hulu, said: “This investment from Time Warner marks a major step for Hulu as we continue to redefine television for both consumers and advertisers. Our two companies have long enjoyed a productive relationship—which includes the availability of past seasons of popular Turner shows on our current SVOD offerings—and we are very proud that Turner’s networks will be included in our planned live-streaming service.”