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Warner Bros. Home Entertainment Offsets Soft Theatrical Results

6 Aug, 2014 By: Erik Gruenwedel

Warner Bros. Home Entertainment Aug. 6 reported a near 27% increase in second-quarter (ended June 30) revenue to $563 million from home video and digital distribution of theatrical movies, compared with $444 million during the prior-year period.

Through the first half of the year, the home entertainment studio has generated almost $1 billion ($945 million) in revenue selling movies, which is up 5% from a year ago.

Principal drivers included packaged-media and electronic sellthrough releases of The Hobbit: The Desolation of Smaug and The Lego Movie (the latter released June 17) and growth in license fees from television production.

The Warner Bros. unit also generated $110 million distributing Warner Bros. Television both physically and digitally, which was down from $147 million a year ago. Indeed, packaged media sales and physical rental declined modestly in the quarter, offset in part by a 32% increase digital movie sales, according to CFO Howard Averill.

"We remain encouraged with the continued digital transition in home entertainment," Averill said on the fiscal call with analysts.

Overall studio operating income increased 29% ($53 million) to $234 million. Revenue declined 2% ($71 million) to $2.9 billion mainly due to softer theatrical performances in the quarter compared to the prior year’s theatrical slate, which included Man of Steel, The Hangover Part III and The Great Gatsby.

It was the studio's most profitable quarter in 10 years.

Separately, HBO said it grew revenue 17% ($201 million) to $1.4 billion primarily due to inaugural SVOD licensing of select original programming to Amazon Prime Instant Video. Operating income increased 19% ($89 million) to $548 million.

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