Time Warner Cable's 'Best Quarter in Its History'

Triple-Play Packages Drive Growth; AOL Loses Subscribers

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NEW YORK (AdAge.com) -- Richard Parsons, Time Warner's chairman-CEO, was upbeat today as he unveiled the company's first-quarter earning results, telling analysts he is confident that Time Warner's ongoing strategy will restore synergy between its disparate holdings. Time Warner's first-quarter revenue grew 1% over last year to $10.5 billion thanks largely to its cable division and its triple-play offer.
Time Warner Chairman-CEO Richard Parsons
Time Warner Chairman-CEO Richard Parsons

The triple-play bundle -- in which consumers can purchase cable, phone service and high-speed Internet in one package -- helped Time Warner add 82,000 new basic-cable subscribers in the first three months of 2006. Currently, 9% of Time Warner's subscribers are signed up for the triple-play bundle.

"In my opinion, Time Warner Cable delivered the best quarter in its history," Mr. Parsons said. For the first quarter, the cable division showed a 15% rise in revenue to $2.6 billion. Time Warner Cable has 11 million cable subscribers, of which more than 50% are digital-video subscribers.

Earnings up 60%
Thanks to Time Warner's cable business and the sale of its book group to Lagardere and other assets, the holding company's first-quarter earnings were up 60% over this time last year. Earnings grew to $1.46 billion, or 32 cents per share, from $915 million (19 cents per share) in 2005.

This increase comes despite online division AOL's recent poor performance. Revenues from AOL declined 7% from a year ago to $2 billion. It lost 835,000 subscribers in the first quarter (AOL has 18.6 million U.S. members). Part of the decline in subscriptions was expected: Time Warner is actively encouraging more subscribers to move to broadband. Executives anticipate a similar decline at AOL next quarter followed by improvement as the year progresses.

According to comScore Media Metrix, in the first quarter AOL had 107 million average monthly domestic unique visitors and 53 billion page views. Executives are optimistic that Time Warner's partnership with Google will give the company renewed momentum in driving traffic to online properties. Despite the declining number of subscribers, AOL's ad revenues increased by $81 million, or 26%. Ad revenue increased for display, paid-search and performance-based advertising.

Decreases in film revenue
Filmed-entertainment revenues declined 8% to $2.8 billion due to decreases in worldwide theatrical revenue. Earnings were also hurt by lower TV revenue from theatrical product and lower sales of television product on home video.

Network revenue (Turner Broadcasting, HBO and the WB) rose 3% to $2.4 billion. Content revenue was reduced, but subscription revenue increased 8% due to higher rates, and advertising revenue was up 3%. Six percent growth in advertising revenue at the Turner networks partly mitigated a 10% decrease in ad revenue at the WB. WB will merge with UPN next fall to become the CW.

Revenue for publisher Time Inc. were flat relative to last year. While advertising revenue grew $12 million (supported by higher online advertising revenue, acquisitions of Essence and Grupo Editorial Expansion as well as recent magazine launches), subscription and other revenues declined. Despite current softness in the magazine industry, executives are optimistic that Time Inc. brands will remain strong as they evolve beyond print and develop online.
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