TIME WARNER REPORTS EARNINGS NEARLY DOUBLE

Net Income Tops $1 Billion at Media Giant

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NEW YORK (AdAge.com) -- Time Warner today said 2004 was the year the world's largest media company "settled down" and put its troubles related to its merger with America Online to rest as its fourth-quarter earnings nearly doubled.

Net income for the fourth quarter almost doubled, from $639 million to $1.1 billion. Revenues rose to $11.1 billion from the prior-year quarter. For the full year, Time Warner earned $3.36 billion from $2.6 billion a year ago, and revenues rose to $42.1 billion from $39.6 billion.

Stock price dips
Despite the positive news, Time Warner stock closed Feb. 4 at $18.04, down 12 cents.

Advertising revenues across Time Warner's operations tallied $6.9 billion, up from $6.1 billion in the year-ago period, though Time Warner is substantially more dependent on revenues from subscriptions and content than it is on ad sales.

The No. 1 media company is parent to a diverse media portfolio, which includes the Time Inc. publishing division, which includes Time, People and Sports Illustrated; AOL; Warner Bros. film and TV studios; cable networks CNN, TNT, TBS, TCM, among others; and the WB broadcast network.

The cable networks saw an 11% growth in advertising revenues for the quarter from the same period a year ago, while WB network's ad revenues were flat.

Video on demand
The strength of Time Warner's TV content is expected to drive much of the growth in digital tier video-on-demand services. The company said premium cable subscription channel HBO and its digital spinoffls are the most popular drivers of VOD services in cable.

Time Warner Chairman-CEO Dick Parsons refused to give further details about the company's joint bid with Comcast for the Adelphia cable system. Discussing Time Warner Cable's business, Mr. Parsons said that the company added 153,000 new digital video recorder subscribers, the best quarter yet for the cable operator.

DVD sales
Revenues from DVD sales of Warner Bros.-produced TV shows will top $1 billion dollars in 2005. "This business barely existed three years ago," Jeffrey Bewkes, chairman of entertainment and networks at Time Warner, said during the company's full-year results conference call this morning.

The company has 10 of the top 25 DVD franchises in TV, including The Sopranos and Sex in the City, and is having one of its most prolific years in broadcast network production, with 25 shows in the 2004-05 season. Warner Bros. produces shows such as Without a Trace and Cold Case on CBS.

Dent the syndicated market?
Some industry observers believe the huge growth in sales of TV shows on DVD could impact the $3 billion-plus syndicated TV market.

Networks no longer need to broker syndication deals to begin to earn money "off-network" if they can simply roll out a DVD. Analysts say that if viewers already own the DVD of a particular series, and can also watch reruns on video on demand, will they still be interested in catching late-night reruns. Industry observers also ask whether station groups will still pay big bucks for such shows.

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