By Chelsey Dulaney
Time Warner Inc.'s profit easily topped Wall Street expectations
in the second quarter, as new videogame releases helped drive
revenue higher in its Warner Bros. division.
Despite the upbeat results, Time Warner shares fell 7.1% to
$113.01 in morning trading amid a broader selloff of media stocks.
The declines come after Walt Disney Co. on Tuesday cut its
long-term earnings growth target for its cable business, as
consumers increasingly opt for less costly "skinny packages" or
abandon cable altogether.
Time Warner, which owns cable channels HBO, TNT and CNN, has
also felt the impact of this shift. The company has been working to
adjust its business model as the Internet remakes the television
landscape, in part by targeting so-called "cord-cutters," or people
who don't subscribe to pay TV.
In April, the company began selling a broadband-only version of
HBO, dubbed HBO Now, through both digital distributors such as
Apple Inc. and traditional partners such as Cablevision.
The online HBO offering helps Time Warner compete for the
growing audience of people who consume their programming on the Web
from Netflix Inc. and others. But the move risks alienating
companies that have distributed Time Warner's programming for
decades.
Chief Executive Jeff Bewkes said Wednesday that Time Warner is
"investing aggressively to position the company for continued
growth, including the successful launch of HBO Now."
In the latest quarter, Warner Bros., the largest top-line
contributor, saw revenue grow 15% to $3.3 billion. Time Warner said
the growth was driven by higher videogame revenue, due to releases
of "Batman: Arkham Knight" and "Mortal Kombat X." TV licensing
revenue also grew on syndication of "The Big Bang Theory" and
subscription video-on-demand licensing of "Seinfeld."
Revenue at Turner grew 2.8% to $2.83 billion as a 48% jump in
content revenue, driven by licensing of some content to Hulu,
offset a 1% decline in advertising revenue.
HBO revenue inched up 1.5% to $1.44 billion.
In all, for the quarter ended June 30, Time Warner reported
earnings of $971 million, or $1.16 a share, up from $850 million,
or 95 cents a share, a year earlier. Excluding some items, earnings
were $1.25 a share.
Revenue grew 8.2% to $7.35 billion.
Analysts expected earnings of $1.03 a share on revenue of $6.9
billion.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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