Time Warner Earnings Increase with Lift from Turner, HBO

NEW YORK: Time Warner’s revenues increased 3 percent to $7.3 billion in the first quarter, thanks to growth at Turner and HBO, partially offset by a decline at Warner Bros.

Adjusted operating income grew 11 percent to $2 billion, with growth across all operating divisions, partially offset by higher corporate expenses.

Turner saw revenues increase 7 percent to $2.9 billion, with increases of 11 percent in subscription revenues and 5 percent in advertising revenues. Adjusted operating income grew 10 percent to $1.2 billion, primarily due to higher revenues, partially offset by higher expenses, including increased programming and marketing costs. Programming costs grew 4 percent, largely because of higher sports costs. The increase in marketing costs relates to recently premiered and upcoming original series associated with the TBS rebrand.

HBO posted an 8-percent revenue hike, reaching $1.5 billion. Subscription revenues were up 5 percent and content and other revenues up 23 percent. Adjusted operating income increased 6 percent to $486 million, with higher revenues, partly offset by higher programming, marketing and technology costs. Programming costs increased 11 percent, due to higher original programming costs. The higher marketing and technology costs related to the OTT service HBO NOW.

Revenues at Warner Bros. were down 3 percent to $3.1 billion, mainly due to lower theatrical revenues, partially offset by higher television and video games revenues. Theatrical revenues faced a tough comparison with the prior-year quarter, which included revenues from American Sniper and The Hobbit: The Battle of the Five Armies, compared to the release of Batman v Superman: Dawn of Justice late in the current-year quarter. Television revenues increased primarily due to higher international licensing revenues and higher initial telecast revenues. Adjusted operating income was up 29 percent to $426 million, as lower revenues were more than offset by a decline in print and advertising costs, primarily due to fewer theatrical releases, and lower theatrical and video games valuation adjustments, as well as overhead cost savings.

Chairman and CEO Jeff Bewkes said: “We’re off to a terrific start to 2016, as we benefit from the investments we’ve been making in great content and new capabilities in order to take advantage of the growing demand for high-quality video content around the world. Revenues increased 3 percent and adjusted operating income grew 11 percent to a quarterly record of $2 billion due to strong growth across all our operating divisions. In the past several weeks, we’ve seen Warner Bros. release its latest global hit in Batman v Superman: Dawn of Justice, setting the stage for what we expect to be a big year in film, with upcoming releases including Suicide Squad and Fantastic Beasts and Where to Find Them. In television, Warner Bros. continued to show its strength with three of the top five new shows on broadcast television this season among adults 18 to 49 and a record 21 renewals ahead of the upfront this year.”

Bewkes continued: “Turner aired cable’s first-ever NCAA Men’s Division I Basketball Championship game, and Turner and CBS entered into an agreement with the NCAA to extend their television, digital and marketing rights to the NCAA Tournament through 2032. TBS ended the quarter as the number one ad-supported cable network in prime time among adults 18 to 49 and its repositioning as cable’s premier network for young, fresh comedy is underway with the introduction of new programming, including Angie Tribeca, Full Frontal with Samantha Bee and The Detour, the biggest new comedy on cable this year. With its must-watch coverage of the U.S. Presidential campaign, CNN continued to build on its success by more than doubling its prime-time audience in the quarter. Meanwhile, HBO continued to make strides both inside and outside the traditional TV ecosystem, including expanding its OTT reach to new platforms and new international territories. And, more recently, HBO’s epic series Game of Thrones returned to record premiere night viewership. Further demonstrating our commitment to shareholder returns, we returned close to $1.3 billion to our shareholders through share repurchases and dividends year-to-date.”