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Time Warner Earnings Dip Despite TV Gains

Updated 12:30 p.m.

Despite higher revenues from its TV business, Time Warner announced lower first-quarter profits because of lower earnings at is movie unit.

Net income was $653 million, or 59 cents a share, down 10% from $725 million, or 62 cents per share.

Revenues rose 6% to $6.7 billion. Advertising revenues were up 20%, driven by a 31% increase at Turner Broadcasting, which, along with CBS, televised the NCAA Men's Basketball Championship Tournament.

"We're on track to meet our financial goals for 2011 and making a lot of progress toward our longer-term objectives," Jeff Bewkes, CEO, said in a statement. ""We are also very excited about the progress we are making across the company in introducing and expanding our digital offerings to allow consumers to enjoy our content sooner and on more platforms and devices than ever before."

Adjusted operating income at Time Warner's networks unit, which includes Turner and HBO, rose 2% to $1.168 billion from $1.142 billion as programming costs rose 37% due to the NCAA basketball tournament, as well as higher costs for original and licensed programming.  Revenues rose 18% to $3.496 billion from $2.958 billion. Advertising revenue rose 31%, thanks to March Madness and higher sales of HBO programming. After falling in the fourth quarter, domestic news revenues were up in the first quarter.

During the company's earnings call with analysts, Bewkes was optimistic about Turner's prospects in the upcoming upfront ad market. "With the current premiums in the scatter market, low level of cancelations and supply constraints at the broadcast networks, all indicators are very positive," he said. "We're confident our pricing will be near the top end of the industry range across broadcast and cable." He pegged scatter pricing at 20% to 30% above last year's upfront.

Analysts asked whether CBS had gotten the better end of the March Madness deal. Time Warner CFO John Martin said that while there was a cash loss in the early years of the 14 year deal, Time Warner's take would improve as its able to increase subscriber fees on the networks carrying the games and as the number of games it carries increases. While CBS enjoys having a cap on its losses, "we believe we have more of the upside," he said.

Martin also said that HBO, which lost some subs last year because of circumstances with some distributors, had stabilized. "That's what we've seen so far this year," he said.

Martin that the first quarter had been expected to by the toughest quarter this year in terms of profit growth. He said that growth should accelerate in the second half of the year, when the company's movie slate improves, syndication revenues rrise and programming costs return to normal levels. The company also reaffirmed its earlier guidance that earnings per share would be up in the low teens for the year.

The company said it repurchased 37 million shares for $1.3 billion this year.

Though the company's results were better than analysts expected, Time Warner stock was down $1.12 to $36.61 a share in midday trading.