Time Inc. Ad Revenue Grows, but Only Because It Bought AmEx Publishing

Time Warner on the Whole Beats Wall Street Expectations

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Time Warner, the media company that owns HBO and the Warner Bros. film studio as well as Time Inc. for a few more months, surpassed analysts' estimates for both fourth-quarter revenue and profit in results reported on Wednesday.

Excluding some items, earnings were $1.17 a share, the New York-based company said in a statement. Analysts had predicted $1.15 on average, according to data compiled by Bloomberg. Fourth-quarter revenue jumped 5% to $8.6 billion, also topping analysts' estimates.

Pay-TV providers such as Verizon Communications and Comcast are paying more to carry Time Warner's programming, whether it's "Girls" on HBO or professional basketball games on TNT. That kind of revenue at Turner, which includes TNT and CNN, climbed 6% in the fourth quarter.

CEO Jeffrey Bewkes has focused Time Warner's growth strategy on its cable content, which accounts for more than 70% of the company's operating income. He spun off AOL and Time Warner Cable soon after becoming CEO in 2008, and he plans to do the same with magazine publisher Time Inc., the company's worst-performing division, by the end of June. Talks to merge the unit with Meredith Corp., owner of women's titles such as Ladies' Home Journal, broke down last year.

Time Inc.'s revenue in the fourth quarter was essentially flat as a 6% drop in circulation revenue canceled out a 2% increase in ad revenue and a 6% increase in other revenue. Circulation revenue declined both because of falling newsstand sales and lower domestic subscription revenue, the company said.

The increase in ad revenue was a result of acquiring American Express Publishing, undermined a bit by one fewer weekly issue in the quarter in 2013 than in 2012.

Excluding the acquisition of American Express Publishing, subscription revenue would have fallen 10%, ad revenue would have declined 7%, other revenue would have dipped 4% and total revenue would have declined 8%.

Time Inc.'s adjusted operating income declined 14% to $173 million, mostly because of revenue declines at certain magazines outside of American Express Publishing, the company said.

Through yesterday, Time Warner stock had climbed 25% in the past year.

The company's adjusted earnings will expand at a rate in the "low double digits" this year from $3.51 in 2013, a figure that excludes Time Inc., Time Warner said.

Revenue at Warner Bros. rose 7% to $4 billion as "Gravity" and "The Hobbit: The Desolation of Smaug" boosted box-office receipts.

Turner's advertising sales increased just 1% from a year earlier, when political spending for the U.S. presidential race lifted results.

The company raised $1 billion in a bond offering in December and sold its Manhattan headquarters for $1.3 billion earlier this year. Toward the end of 2018, the company plans to move into the Hudson Yards, an office complex under development on Manhattan's West Side that will reduce the amount of space it uses.

In July, Time Warner named Joseph Ripp as CEO of Time Inc. as the magazine unit prepares for its spinoff. Bewkes's move to drop the shrinking magazine business, focusing on TV and film, mirrors plans by other media companies. News Corp. split in two at the end of June, forming separate newspaper and entertainment businesses, and Tribune Co. announced last year it would spin off its newspapers, including the Los Angeles Times, while keeping its TV stations.

Yesterday Time Inc. began laying off hundreds of its 7,800 employees, part of an effort to improve its bottom line before becoming an independently traded company.

~ Bloomberg News and Ad Age staff ~

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