Media Money with Julia Boorstin

Time Warner's Best Quarter Ever

Jeffrey Bewkes

Time Warner CEO Jeff Bewkes was upbeat on the company's first quarter earnings call - his strategy of stripping out extraneous businesses and focusing on creating value through content seems to be working.

The media giant is tapping into the ad recovery and benefiting from cable's strong dual-revenue stream and a successful slate of films.

Bewkes says the company sees demand coming back "across all key advertising categories," and reports that pricing for ads in the scatter market was 20 percent to 30 percent above last year's Upfront ad pricing, which bodes well for this year's Upfronts and Time Warner's second quarter earnings.

Time Warner beat expectations with the highest quarterly earnings the company's ever had, of $735 million or 62 cents a share. Revenue grew 5 percent to $6.3 billion, a hair short of analyst expectations. But the company raised its outlook for the year, saying it expects EPS percentage growth "at least" in the mid-teens. And the company continues to buy back stock - in the first four months of this year it bought back 22 million shares for $666 million.

The company's cable networks managed some impressive growth despite the fact that ratings declined at a number of the network. Even with these lower ratings the company is doing a good job of profiting from a recovering ad market. Operating earnings grew an adjusted 22 percent on 9 percent higher revenue. Bewkes is determined to keep their subscribers engaged - and keep them from cutting the cable cord in favor of watching all content online. On the earnings call he went into detail on the launch earlier this year of "HBO GO," which will allow all HBO subscribers to watch content from the channel on-demand, with no charge.

Warner Brothers' robust DVD business is bucking all the trends - it's actually helping the studio grow operating income 43 percent on slightly higher revenue. Though industry-wide hoe video revenues have consistently been declining by high single digit percentages, Warner Bros.' handily maintained its number one market share in home video and grew revenue by double digits on the success of breakout hit "Blind Side" and "Sherlock Holmes." Video-on-demand and other digital movie sales increased. Now the company is focused on growing digital film sales as well as Blu-Ray, both of which are particularly high-margin home video formats.

Even the struggling magazine division, Time Inc., which has dragged on results in the past few years, swung to operating income of $50 million, from an operating loss of $32 million in the year-ago period. Major cost cutting and a 5 percent increase in ad revenue achieved these earnings gains, despite the fact that revenue was roughly flat.

Not every magazine is doing so well - today Washington Post Company announced it's looking to sell Newsweek, which has been losing money since 2007. More about that in my next blog.

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