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DVD Sparks Time Warner Q3 Film Revenue

8 Nov, 2007 By: Erik Gruenwedel


Global DVD sales of 300, coupled with box office revenue from Harry Potter and the Order of the Phoenix, Ocean's 13, Rush Hour 3 and Hairspray, helped Time Warner Inc.'s filmed-entertainment division post a 33% increase in third-quarter (ended Sept. 30) revenue to $3.2 billion.

Time Warner is parent to Warner Bros. Home Entertainment Group and units Warner Home Video and New Line Home Entertainment.

The $788 million revenue increase helped filmed entertainment post operating income of $268 million, up 123% from $120 million last year.

“With strong home video and theatrical releases in the fourth quarter, we're confident [filmed entertainment operating income] will be up for the full year as well,” Dick Parsons, CEO and chairman of Time Warner, said in his last call with investors.

Time Warner recently named Jeffrey Bewkes CEO, replacing Parsons who remains chairman of the board, effective Jan. 1, 2008.

Bewkes, who was CEO of HBO for seven years before becoming president and COO of Time Warner in 2006, retains his president position.

The change in leadership had been in the works since last year, when Parsons approached the board about a CEO succession plan.

Separately, Time Warner Cable said video grew $400 million (21%), to $2.5 billion, due to acquisitions and penetration of video services, including video-on-demand, pay-per-view and related price increases.

Operating income increased 24% ($131 million), to $681 million, partly offset by acquisition-related depreciation expenses.

The quarter marked the first time the cable division generated more than $100 in monthly revenue per basic video subscriber.

However, the quarter saw an unexpected decline in VOD revenue, which Time Warner Cable executives discounted as emblematic of the ebb and flow of new movie releases.

Time Warner and its cable company for some time have pushed releasing movies on video-on-demand the same day as they come out on DVD.

“Video continues to be a significant part of our dollar growth because of the size of the business, but the percentage growth is much more modest than the other areas,” said John Martin, EVP and CFO of Time Warner Cable. “Video is really a big business. But it is also our most mature business, and we're going to continue slogging it out day-to-day.”

Time Warner announced that Martin will assume the titles EVP and CFO, replacing retiring Wayne Pace. Rob Marcus assumes Martin's CFO position at Time Warner Cable.

Glenn Britt, CEO of Time Warner Cable, said ongoing day-and-date tests of new movies on VOD with DVD with Comcast will continue with no additional rollouts scheduled. He declined to reveal updated results.

Bewkes and Parsons are on the same page regarding Time Warner Cable's strategy to supplant home video rental with video-on-demand releases available on the same day as the DVD.

Parsons has publicly chided the home video rental business model, claiming the studios earn less than 20 cents for every rental dollar earned.

The former CEO didn't mince words last summer when he told investors in London it would be “a cold day in hell” before he frequented a video rental store.

Time Warner Cable reported operating income of more than $1.4 billion on revenue of $4 billion compared to more than $1.1 billion and revenue of $3.2 billion during the same period last year.

Premium digital video subscribers totaled 7.9 million, which included net additions of 128,000 in the quarter. Time Warner Cable has 13.3 million basic video subscribers and 14.6 million overall.

“We have pretty strong momentum in all of our divisions right now and going into 2008,” Bewkes said.

Overall, Time Warner revenue grew 9% to $11.6 billion from $10.7 billion last year.

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