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Weak TV DVD Sales Drop Warner Entertainment Revenue

3 May, 2006 By: Erik Gruenwedel

Soft video sales of “Friends,” among other TV DVD titles, contributed to an 8% revenue decline ($235 million) in Time Warner Inc.'s filmed-entertainment first-quarter (ended March 31) results.

The New York-based media giant posted filmed-entertainment revenue of $2.8 billion, compared to $3 billion during the same period last year.

Total Time Warner revenue, which includes AOL (down 7%), cable (up 15%), networks (up 3%), publishing and filmed entertainment, increased 1% to $10.4 billion, compared to $10.3 billion last year. Net income was $1.5 billion, compared to $915 million last year.

The company said positive contributions from higher-margin home video releases of Harry Potter and the Goblet of Fire and New Line's Wedding Crashers helped grow the unit's operating income 19% ($74 million) to $457 million.

During an investor call, Time Warner executives dismissed the flattening home video market as a seasonal fluctuation that would be offset by ambitious release slates in DVD and theatrically through the summer and end of the year.

“This business, because of the timing of releases into the marketplace, can result in quarterly swings and we really like to look at it on an annual basis,” said Wayne Pace, EVP and CFO. “Both New Line and Warner Bros. will have a very nice year on an overall basis.”

Jeffrey Bewkes, president and COO, reiterated that the catalog category remained the most challenging in regards to unit and pricing pressure for all studios worldwide.

“The sale of TV DVD continues to be the faster-growing section, but DVD overall is slowing,” said Bewkes. “We have a very strong position in catalog, general distribution and TV inventory for DVD, which is one reason why our home video yield has been going up.”

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