Time Warner Sees Strong Subscriber Gains
February 11 2016 - 3:02AM
Dow Jones News
(FROM THE WALL STREET JOURNAL 2/11/16)
By Keach Hagey and Lisa Beilfuss
Time Warner Inc. offered an upbeat forecast for the year after
delivering fourth quarter earnings that topped expectations largely
thanks to lower tax expense.
But operationally, the picture was more mixed, as adjusted
operating income dropped at each of its three divisions: Turner
Broadcasting, HBO and Warner Bros.
Like other media companies that have reported earnings so far
this season, Time Warner generally beat analysts' expectations for
its advertising performance, but came up short in subscription
revenue for its cable networks that include TBS, CNN and HBO. That
slowdown stoked investors' concerns about the long-term strength of
the affiliate fee revenue from TV networks.
Time Warner shares fell 5% to $60.07 in 4 p.m. trading on
Wednesday, their lowest point in more than two years.
However, Time Warner was able to forecast a significant uptick
in affiliate fee revenue growth at Turner and subscriber growth at
HBO.
Signs of weakness in its pay-TV bundle did take a toll on Time
Warner's earnings for the December quarter. Subscription growth at
Turner was just 1%, below analysts' expectations, because of the
impact of foreign currency fluctuations at its international
channels. Domestically, higher pricing was partially offset by
lower subscriber numbers at its channels.
But Turner predicted that subscriber revenue would accelerate to
"low teens" percentage growth starting in the first quarter of this
year, now that it has achieved the rate increases it was targeting
at all of its biggest distributors, the company said.
HBO also saw some signs of weaker-than-expected growth, with
subscriber revenue rising 3% in the fourth quarter. That fell short
of 4% growth analysts expected.
HBO Now, its broadband-only offering, contributed meaningfully
to subscriber growth, though not quite at the level that some
analysts had been estimating. HBO Now signed up 800,000 subscribers
over the past year, the company disclosed on the call. The company
said it plans to more aggressively market its HBO Now product.
Time Warner Chief Financial Officer Howard Averill predicted
that over the next couple of years HBO subscription revenue growth
would be by a percentage in the "high-single-digits."
Strength in HBO helped offset weakness in Time Warner's film
segment. HBO revenue rose 5.5% to $1.41 billion, while Warner Bros.
revenue tumbled a worse-than-expected 15% amid a dearth of
blockbusters.
Overall revenue declined 5.9% from a year earlier to $7.08
billion.
In all for the quarter, Time Warner reported profit of $857
million, or $1.06 a share, up from $718 million, or 84 cents, a
year earlier.
Analysts generally attributed the higher-than-expected earnings
to a low tax rate. Its income-tax provision was $280 million last
quarter, versus $381 million a year earlier on operating profit
that was roughly flat.
(END) Dow Jones Newswires
February 11, 2016 02:47 ET (07:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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