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Warner Video Revenue Tops Record $1 Billion

25 Jul, 2002 By: Thomas K. Arnold

Warner Home Video's “record revenue” of more than $1 billion helped save the day at beleaguered AOL Time Warner as the huge media concern posted its first quarterly net profit since the completion of its megamerger, according to the company's second-quarter financial release.

Prominently mentioned is the fact that the filmed entertainment unit's EBITDA (earnings before interest, taxes, depreciation and amortization) growth of 31 percent “is primarily driven by the record results at Warner Home Video, which reported quarterly net revenue topping $1 billion for the first time in the division's history.”

AOL Time Warner noted that worldwide DVD revenue “more than doubled” and VHS revenue is up 36 percent from the second quarter of last year.

“I think this is an interim milestone to the explosive success of DVD and the exceptional product Warner Bros. has again produced,” said Warner Home Video president Warren Lieberfarb. He noted that the “lineup of titles” that came to his division from its studio parent was exceptionally strong, led by Harry Potter and the Sorcerer's Stone, which shipped 43 million units worldwide, and Ocean's Eleven, which made “a significant contribution as well.”

Overall, AOL Time Warner reported a net profit of $394 million, or 9 cents a share, for the second quarter, which ended June 30. That compares with a net loss of $734 million, or 17 cents a share, in the second quarter of 2001, when the company took a $1.7 billion charge related to good will and amortization. Earnings for the second quarter of 2002 were 24 cents a share, the same as in the second quarter of last year, while revenue was up 10 percent, to $10.6 billion.

Wall Street analysts had expected the company to post earnings of 22 cents a share and revenue of $10.2 billion.

The positive financial news came a week after a shakeup of top management put control of the company back in the hands of traditional media executives.

Not surprisingly, traditional media helped salvage AOL Time Warner's second-quarter financials, with strong cable, film and video performances offsetting weaknesses on the online side. Indeed, the biggest revenue gains came from the “content and other” category, which includes filmed entertainment, with sales rising 20 percent, to $3.5 billion. These gains, according to the report, were “led by the home video releases of Harry Potter and the Sorcerer's Stone and Ocean's Eleven and continued robust theatrical results.”

AOL, meanwhile, is having a tough time. The online service added just 492,000 new subscribers in the quarter, less than half the million new subscribers analysts had expected. The online unit reported EBITDA of $473 million, down from $652 million in the year-earlier quarter. Revenue fell to $2.27 billion from $2.33 billion.

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