Crown Media Reports Profit in Second Quarter
International Networks Push Discovery Profits Higher
Basic Momentum Continues at Comcast
Sinclair Revenue Flat in Q2
Media Stocks Hammered as Market Loses GroundCBS Earnings Jump in Second Quarter
Time Warner reported higher than expected earnings in the
second quarter as its cable networks reported strong advertising growth. And
the company said it expected earnings to accelerate through the rest of the year.
Net income for the quarter was $638 million, or 59 cents a
share, up from $562 million, or 49 cents a share, a year ago.
Revenues rose 10% to $7 billion, which the company said was
its highest growth rate since the third quarter of 2007. Ad revenues were up
8%, including an 11% gain at Turner Broadcasting.
Analysts were expecting a profit of 56 cents on revenue of
"We had another successful quarter and
remain on track to meet our financial goals for the year," Jeff Bewkes, chairman
and CEO said in a statement.
Bewkes added that the company was making
progress shaping its business models to benefit from the transition to a
digital media environment. "We also have bought back $2.3 billion of our shares
so far this year, reflecting our confidence in our competitive position and
growth prospects and our dedication to providing attractive shareholder returns,"
During the company's earnings conference
call with analysts, Bewkes said that the company's big cable networks, TNT and
TBS, drew viewers well thanks to sports and original shows. But he noted that
some of the off-net shows then networks had acquired weren't performing as
"We aren't satisfied with
the recent ratings on some of our acquired content on TBS and TNT. That's
something we are very focused on and plan to fix," Bewkes said.
"We are confident that our plans to add some of the biggest hits
on TV would boost viewership, shows like The Big Bang Theory," which joins the TBS lineup at the end of the
TNT will be stripping The Mentalist next year and the network
has recently made deals to add Castle
and Hawaii Five-0.
"Keep in mind that even one successful show can have a
significant impact of these networks and we think we have several in the
pipeline," Bewkes said. "As a result, we expect these moves will improve
ratings starting with TBS in the fourth quarter."
The issues highlight that in the current media environment with
viewers having more choice about what to watch, the difference between hit
shows and mediocre ones is becoming more profound. "Hit shows and big brands
win, mediocre stuff loses," Bewkes said.
While sports have been driving TNT, Bewkes said getting an NFL
package was not necessary for the network. "We don't need an NFL package, but
we always look at things and try to figure out, could they be beneficial to the
mix of what we're doing, and sports is a pretty important part of the offering
at Turner," he told the analysts. "You should assume that we'd only do
something as big as a major league if we thought we were going to make money
out of it. We don't do these as loss leaders."
Bewkes added that Time Warner
hopes the NBA owners and players can get together on a deal for next season,
adding "it's a not a long-term issue for us and we have protections built into
our contract and would work with our long terms NBA partners on collaborative
solutions if" games were canceled.
The issues over acquires series did not appear to hurt Turner in
the upfront. In a strong cable market, Turner performed better than its peers,
Bewkes said. "Our large-reach entertainment networks, TNT and TBS, both saw a
solid double-digit CPM increases, looking down at the higher end of all of TV,
broadcast or of cable"
Bewkes said it was the third time in the past four years that
TNT and TBS's price increase outstripped the average of the broadcast networks,
which mean the price gap between Turner on cable and broadcast was narrowing.
Bewkes added that Turner's upfront strength extended to truTV
and Adult Swim, which saw pricing and volume increases substantially higher
than the average for cable networks. "Our news networks also performed
extremely well with CNN outpacing its cable news competitors for both CPM and
volume growth," he said.
Time Warner's networks group, which
includes Turner and HBO, reported that adjusted operating income rose 5% to
$1.03 billion in the quarter from $981 million the year before. Programming
costs rose 9% because of higher expenses for original and sports programming,
notably the NCAA Men's Basketball Tournament. Operating income was also
affected by expenses marketing HBO Go.
Revenue for the networks group rose 9% to
$3.45 billion from $3.17 billion. Subscription revenues were up 7%, ad revenues
were up 11% and content revenues were up 18%.
TV production also had a
great quarter, Bewkes said. "At this year's upfront, Warner's placed 27 series
on the broadcast schedules, including 16 returning shows and 11 new shows. That
places Warner's as the number one producer of TV programming yet again this
Time Warner raised its expectations for
the full year, projecting that net income per share growth will finish in the
low teens from last year's $2.41 a share. "We
remain fully on track to meet if not exceed our guidance for the full year,"
John Martin, Time Warner's chief financial and administrative
officer, said that they year has progressed more or less as planned. "The first
quarter was our most challenging one from a profit growth perspective due to
difficult film comparisons and the significant investments we made in the NCAA
basketball tournament. In the second quarter, we returned to profit growth and
adjusted EPS growth," he said.
Martin said the company expects accelerating growth in profit
and earnings per share beginning in the third quarter. "In fact, growth would
be even higher if not for the timing of programming and marketing spending in
the third quarter at the networks," he said. Time Warner expects programming spending
to grow at a mid-teen rate during the quarter. Ad revenues are expected to grow
at the same rates as in the second quarter.
In the fourth quarter, "we expect another quarter of very, very
strong profit growth," Martin said.
"Growth in programming and marketing will be much more modest in
Q4 as compared to the third quarter, but we'll also benefit from this year's
very strong upfront, and our expectations for improved programming," he said.
"So, we fully anticipate a very strong second half for this year."
Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.
The smarter way to stay on top of broadcasting and cable industry. Sign up below.
Thank you for signing up to Broadcasting & Cable. You will receive a verification email shortly.
There was a problem. Please refresh the page and try again.