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Bewkes: Christmas ‘Really’ Important to Home Video

5 Nov, 2008 By: Erik Gruenwedel

Warner Home Video

Time Warner CEO Jeff Bewkes said he is aware of “reduced footprint traffic” at DVD retail, and is “watching closely” to see what kind of impact the current economic climate may have on home video sales.

“Essentially, the industry is down a little bit, but we [Warner Home Video] are up so far,” Bewkes told analysts during a financial call. “We have been outperforming the home video industry.”

He said U.S. consumer spending on home video was $13.5 billion, which the executive said was down about 2.5% year-to-date versus the prior-year period.

Bewkes said consumer spending for Warner Home Video DVDs topped $2.7 billion, an increase of 7%. He said the studio remained No. 1 with 20.5% market share in the United States year to date, which is up from 20% last year.

“Generally, and this goes beyond DVD sales and includes movie tickets, those kinds of home entertainment options seem to be fairly resistant to economic downturns,” Bewkes said. “What we don’t know yet in the fourth quarter is what, if any, impact there may be on DVD catalog in particular. We think there will some but we not sure how much, and we think we will do better than other studios.”

He said Christmas will be key to see if consumers purchased fewer players and catalog titles, which the CEO said could cause some reduction.

“There is one offsetting point,” Bewkes added. “It may be that Blu-ray players are coming out under $200, which could hold up [home video] sales a little bit.”

John Martin, EVP and CFO, said he anticipated strong sellthrough of Warner’s major titles, including The Dark Knight, which bows on DVD and Blu-ray Dec. 9.

Martin said the studio continued to ramp up electronic sellthrough of movies, which he said had generated nearly $300 million year-to-date, double from last year.

“That is helping to buoy any potential downdraft in DVD,” Martin said.

The Dark Knight and the DVD release of Sex and the City: The Movie proved no match to the bottom line as the filmed-entertainment division of Time Warner posted third-quarter (ended Sept. 30) revenue of $2.9 billion, down $297 million (9%) from $3.1 billion during the prior-year period.

The latest caped crusader installment from director Christopher Nolan could not best last year’s theatrical releases Harry Potter and the Order of the Phoenix, Rush Hour 3 and Hairspray, and the DVD release of 300, according to Time Warner.

Adjusted operating income topped $381 million, up $22 million (6%) from $359 million during the prior-year period.

The tally, however, does not include ongoing restructuring charges totaling $17 million in the quarter related to the previous shuttering of New Line Cinema and New Line Home Entertainment.

Overall, revenue increases from Time Warner Cable, CNN (due to political ads) and HBO, helped Time Warner earn a relatively flat net income of $1 billion on flat revenue of $11.7 billion.

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