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Time Warner Reports Small 4Q Profit Gain

Updated 2:00 p.m. ET

Time Warner reported slightly higher profits in the fourth quarter as its TV networks reported mid- to low single-digit revenue increases.

Net income was $773 million, or 76 cents a share, up slightly from $769 million, or 68 cents a share, a year ago.

Revenues rose 5% to $8.2 billion, although ad revenues rose a scant 2%, partly due to the NBA lockout, which continues to affect ad sales.

"In 2011, Time Warner had an ambitious agenda and we accomplished what we set out to do and more," said CEO Jeff Bewkes in a statement. "For 2012, we will execute against the same strategic priorities that have driven our success in recent years: We're investing aggressively in programming, production and marketing. We're further accelerating our Content Everywhere initiatives. We're expanding our presence internationally in attractive territories. And we're maintaining our strict focus on operating and capital efficiency."

Following a trend of media companies giving cash to shareholders, Time Warner announced that it was increasing its dividend by 11% and would be purchasing $4 billion more in stock.

Operating income at Time Warner's Networks division, which includes Turner Broadcasting and HBO, rose 26% to $1.14 billion from $904 million a year ago. Revenues rose 5% to $3.5 billion from 3.3 billion.  Subscription revenues rose 5% and advertising revenues were up just 2%. The company also chalked up a 21% increase in content revenues.

The company blamed the tiny gain in ad revenue on the NBA lockout, lower scatter demand and lower ratings at TNT.

John Martin, chief financial and administrative officer at Time Warner, said during the company's earnings call with analysts that for 2012, the company was "cautiously optimistic" about the ad market.

"Advertising growth is tracking somewhere around the mid-single digits. That reflects positive ratings trends at most of our networks, particularly TBS. Scatter pricing is up solidly over upfront levels although volume remains relatively behind recent years," he said.

Martin said that demand in the scatter market has been light from companies in the packaged goods category and that there's been some softness in movie studio spending.

Cancellations of upfront buys during the second quarter have been at about the same level as the past few years, he said.

Martin noted that the NBA lockout was having a lingering effect on TNT ad sales. "While the fan and the viewer response to the return of the NBA has been very strong and very encouraging, some of the advertising dollars that are usually spent there were committed elsewhere during the lockout period and we fully expect that to be a temporary effect that will be resolved by returning to a normal selling cycle," he said.

Bewkes told the analysts that Turner will be spending more on programming, particularly original programming. "At Turner, we'll keep ratcheting up our investment in content as we seek the optimal mix of sports, originals and acquired programs."

Bewkes said that Warner Bros.' television production arm would also be ramping up investment in 2011 after what he called a "terrific" 2011.

"We are continuing to see a very favorable demand trend. The broadcast and cable networks are increasing investment in original scripted TV, their strong demand for the biggest hits coming off broadcast in the syndication. We're still seeing international license fees climb even in Europe and of course, there is new demand from SVOD providers, both here and overseas," Bewkes said.

He added that Warner Bros. has new hits on broadcast such as 2 Broke Girls, Suburgatory, Person of Interest and Alcatraz. "These shows will pay dividends for years to come as they enter the syndication market," Bewkes said.

Time Warner said that HBO's subscriber base rose by 200,000 for the year. The gains came despite a lack of growth in multichannel households and losses at a couple of domestic distributors with which HBO had contract renewal disputes.

"In 2012, we are optimistic that we'll see improved trends at each of these distributors," Martin said.

Time Warner said that for 2012 in expects adjusted diluted net income per common share growth to be in the low double digits, versus $2.89 for 2011.

For the full year 2011, Time Warner's revenues rose 8% to $2.9 billion.