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Warner: Home Entertainment Rise Can't Offset Theatrical Slump

5 Nov, 2014 By: Erik Gruenwedel

Warner Home Video Nov. 5 reported third-quarter (ended Sept. 30) revenue of $390 million from packaged media and digital distribution of movies — up 5% from revenue of $371 million during the prior-year period.

Through the first nine months, WHV revenue from movies is up 5% to more than $1.3 billion. Home entertainment revenue from TV shows declined nearly 12% to $144 million. For the year, revenue is down about 20% to $368 million.

The results were not enough to offset Warner Bros. Studios from reporting a 23% ($70 million) decline in quarterly operating income to $237 million. The decline was attributed to the industry-wide soft summer box office and lower off-network (syndication) domestic license fees.

Warner has begun previously announced layoffs throughout the studio as part of parent Time Warner’s 10% reduction in its 9,000-person global workforce. Indeed, Warner was subjected to $45 million in restructuring and severance costs in the quarter — prior to the studio layoffs, which began Nov. 4.

Revenue increased 3% ($81 million) to $2.8 billion mainly due to license fees from subscription streaming services for TV content and higher license fees of theatrical product. Warner Bros. Television is one of the largest producers of primetime and off-network programing.

Separately, HBO reported a near 25% ($122 million) drop in operating income to $380 million. Revenue increased 10% ($118 million) to $1.3 billion.

The premium content channel attributed the decline in operating income to a 16% hike in programing costs, due to increased expenses in original and acquired programing. In addition, HBO accrued $48 million in restructuring and severance costs associated with Time Warner’s company-wide downsizing.

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