Time Warner Sees Operating Income Slip in Q1

Revenues at Time Warner increased 3 percent to $8 billion in its first quarter, with growth at Turner and HBO partially offset by a decline at Warner Bros., while operating income slipped.

Operating income decreased 13 percent to $1.8 billion and was down 8 percent on an adjusted basis to $2 billion, citing declines at all operating divisions, partially offset by “positive intersegment eliminations.”

Turner saw revenues increase 8 percent to $3.3 billion, due to increases of 8 percent in subscription revenues, 9 percent in advertising revenues and 9 percent in content and other revenues. Operating income decreased 7 percent to $1.1 billion. The growth in revenues was more than offset by higher expenses—mainly increased programming and marketing costs.

HBO had a 3 percent gain in revenues to $1.6 billion, due to an increase of 10 percent in subscription revenues, partially offset by a decrease of 29 percent in content and other revenues. Operating income decreased 12 percent to $516 million. The growth in revenues was more than offset by increased expenses, including programming costs—programming expenses increased 8 percent due to higher acquired and original programming costs.

Warner Bros.’ revenues decreased 4 percent to $3.2 billion, primarily due to lower TV and theatrical revenues, partially offset by higher games revenues and the favorable impact of foreign currency exchange rates. Operating income was down 34 percent to $322 million, primarily due to the decline in revenues.

Jeff Bewkes, Time Warner’s chairman and CEO, said: “We’re off to a strong start to 2018 and we remain on track to meet the financial goals we laid out at the beginning of the year, as we continue to execute our strategic objectives, including investing in and delivering the most compelling content to audiences around the globe and across platforms. Turner had another successful multiplatform airing of the NCAA Division I Men’s Basketball Tournament, while CNN was the number one news network among adults 18 to 34 and remained the leader in digital news. Additionally, year-to-date, TNT’s The Alienist is the number one new cable drama and TBS’s The Last O.G. is the number one new cable comedy. Home Box Office had another standout quarter and we recently had the much-anticipated return of Westworld (produced by Warner Bros.), which saw viewership of the second season premiere episode increase 13 percent compared to the prior season’s average.”

Bewkes continued: “Warner Bros. remained a leader in television production with top comedies like The Big Bang Theory and Young Sheldon and top unscripted series, including The Voice, The Bachelor and Ellen’s Game of Games, airing across the broadcast networks. Theatrically, Warner Bros.’ latest sci-fi epic, Ready Player One, which opened at the end of March, is off to a strong start at the global box office and is the studio’s highest-grossing film ever in China. We look forward to the resolution of the legal challenge to our pending merger with AT&T and remain excited about the benefits of the merger, such as the potential to further strengthen our businesses by accelerating our innovation and increasing our ability to connect more directly with consumers.”