Time Warner profit is down from last year, but results beat forecasts by a significant margin, sending shares higher in Wednesday's trading.
CEO Jeff Bewkes raised the company's full-year outlook and said that results just from the company's content divisions (excluding long-suffering AOL) are on track to beat last year's results by 23 percent.
This quarter earnings-per-share came in at 61 cents (excluding one-time items) far surpassed the 53 cents analysts were expecting. Revenue came in right in line with expectations at $7.1 billion, down from the year-ago quarter.
The cable division continues to be an area of strength with a 5 percent increase in revenue and 3 percent growth in operating income. Bewkes singled out the film studio as consistently profitable, saying it's underappreciated, pointing to hits like "The Hangover." The division posted a 6 percent increase in operating income even though revenue fell 4 percent from the year-earlier quarter. The publishing division and AOL continue to drag on results. Time Inc. is planning more layoffs and restructuring, the second round of reductions in a year. But Bewkes points out that the $100 million in restructuring costs Time Inc. will incur has been calculated into the higher outlook for the year.
The good news about AOL's is that the division is on track to spin off with an IPO by the end of the year. A number of analysts have told me that Time Warner has been trading at a discount because of AOL and that Wall Street is anxiously awaiting having the web property off Time Warner's books.
In today's earnings call Bewkes emphasized that Time Warner is all about content, and exploiting that content across new platforms. He went into detail about how new technology can help generate new revenues, pointing to the example of putting magazines on e-Readers and giving password-protected access to cable content online.
Here's an excerpt from an e-mail CEO Bewkes sent to Time Warner employees, that details this strategy.
The e-mail's subject: Innovating for Future Success.
From Jeff Bewkes:
We’ve had a lot of good news this past quarter, despite the tough economy. Our financial performance exceeded expectations and kept us on track to post solid results for the full year. So we have raised our business outlook for 2009. We also expect to spin off AOL by the end of the year and become a more content-focused media company. In addition, we’re making strong progress on our key operating objectives. Our financial and strategic successes give me confidence that we’ll be well positioned to drive steady and attractive returns to shareholders next year and into the future.
As I’ve mentioned before, we have four operating objectives to drive the profitability of our core content businesses: Leveraging our scale and brands to deliver compelling content consistently; Continuing to improve the efficiency of our operations to maintain our competitive advantage; Expanding internationally; and Developing new business models to capitalize on shifting technologies in a way that both benefits consumers and builds on our successful business models.
Let me highlight that last objective here. Time Warner has a long tradition of building businesses on new technologies to provide consumers with the choice and convenience they want – from pay television at HBO and CNN’s around-the-clock news to the leadership at Turner and HBO in video on demand (VOD) and Warner Bros.’ launch of DVDs.
We’re extending that record of innovation throughout Time Warner. For example, we’re advancing TV Everywhere even faster than I expected. As you know, TV Everywhere is an industry initiative to allow those who subscribe to TV in their homes to watch their favorite programs at no extra charge on a wide range of other devices. Consumers get more for their money, and the industry benefits from expanding its current business model to the Internet. There are several trials underway with major distributors, with additional distributors and programmers planning to join. We’re also developing the technological tools to ensure TV Everywhere is a seamless user experience.
Looking ahead, we’d like to develop a similar model for the publishing industry. As e-readers and other mobile technologies become more sophisticated and popular, consumers will want magazine content available conveniently on a range of these devices. So it’s an exciting opportunity for Time Inc. and the rest of the industry to give consumers the content they want, when and how they want it – while growing both circulation and advertising revenue.
Among other innovations going on around the company, Turner last month launched the new CNN.com. It’s been totally redesigned to make it more visually compelling and to integrate more video and such features as a new opinion section and partnerships with Oprah.com, PEOPLE and Entertainment Weekly. The press reviews have been very positive, and we look for CNN.com to extend its leadership as the #1 destination for online and wireless news.
Another example is a recent VOD trial that Warner Bros. conducted with Comcast in Atlanta. In a first for a major studio, Warner Bros. released two films – Observe and Report and Ghosts of Girlfriends Past – on VOD for cable subscribers several days before they were put out on DVDs and Blu-ray Discs. This VOD trial not only offered consumers more options to see the movies, but it also helped promote the sale of their DVDs themselves.
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