TV-Ad Sales Outperform at Time Warner; Print Struggles

Conglomerate Gets 70% of Operating Income From TV

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Time Warner reported first-quarter earnings that beat analysts' estimates because of strong gains in TV advertising.

'Southland' on TNT
'Southland' on TNT

Revenue rose 4.4% year-over-year, to nearly $7 billion, Time Warner said Wednesday. Analysts' average estimate was $6.8 billion. Adjusted operating income grew 6%, to almost $1.4 billion.

The media company, led by CEO Jeffrey Bewkes, derives more than 70% of its annual operating income from its TV business, which produces shows such as the hit series "The Big Bang Theory." Advertising at its networks, including TBS and TNT, was up 6% in the first quarter from a year earlier, while subscription fees to carry Time Warner 's cable networks rose 5%.

"Cable-network advertising revenue is what matters most, and that 6% growth was ahead of our estimates," Michael Morris, an analyst with Davenport & Co. in Richmond, Va., said in an interview. He has a "neutral" rating on Time Warner shares.

But revenue at Time Inc., whose magazines include People and Sports Illustrated, fell 3.1%, to $774 million, with ad revenue and subscription revenue down 5% and 2%, respectively. The unit's adjusted operating income slid 38%, "primarily reflecting the decline in domestic magazine advertising revenues," Time Warner said.

Magazine publishing has continued to struggle this year, which suggests that any economic improvement is benefiting TV and digital, rather than print, with an ad rebound. Time Inc. CEO Laura Lang, a former digital-agency CEO, has retained Bain Capital to Identify promising "big bets" to help the unit "get back on a revenue growth trajectory," as she told employees in a March memo.

Time Warner 's filmed-entertainment revenue jumped 6.9%, to $2.78 billion, helped by ticket sales for its February film "Journey 2: The Mysterious Island." The Warner Bros. film division faces tougher comparisons this year, following the boost it got in 2011 from the final installment of the Harry Potter franchise. Upcoming releases include "Dark Shadows," "The Dark Knight Rises" and "The Hobbit."

-- Bloomberg News --

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