Time Warner Acquires 10% Stake in Hulu as Cable Drives Profits

Stake Said to Be Valued at $583 Million

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Time Warner acquired a 10% stake in Hulu, casting an eye to the future of TV even as its second-quarter results proved there's still plenty of life in the traditional cable model.

Time Warner paid $583 million for its 10% stake in the web-streaming service, according to a person familiar with the matter. That stake doesn't equal the stakes of Hulu's current investors 21st Century Fox, Walt Disney Co. and Comcast's NBCUniversal. Time Warner decided against taking a larger stake in Hulu partly because of regulatory concerns, said the person, who declined to be identified discussing non-public information.

Time Warner Chief Executive Officer Jeff Bewkes is spending billions to create original must-see programming and acquire sports rights to attract TV viewers and extract higher fees from distributors like AT&T and Comcast. On Wednesday, the company reported second-quarter sales gains at both its HBO premium channel and Turner unit. At the same time, Mr. Bewkes is trying to win over the growing legions of cord-cutters who don't pay for cable or satellite TV.

The Hulu deal is part of a big digital push by Time Warner, which includes a web-only version of HBO and making channels available in slimmer online packages like Dish Network's Sling TV.

Time Warner's investment in Hulu will help build up a viable third player in the growing market for online-only video services led by Netflix and Amazon.com -- and bring much-needed cash to fuel Hulu's growing ambitions in original programming. In a separate affiliate deal announced Wednesday, Hulu will carry Time Warner's channels in its upcoming live TV service.

Revenue during the quarter fell 5% to $6.95 billion, missing analysts' estimates of $7.06 billion. But Turner and HBO helped boost earnings. Sales at the cable network unit, which include TNT and TBS, climbed 6% to $3 billion. The company saw a 6% increase in ad revenue and a 11% rise in fees paid by distributors. HBO sales rose 2% to $1.5 bulluon.

-- Bloomberg News

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