Analyst Upbeat on Warner DVD Biz10 Jul, 2009 By: Erik Gruenwedel
Buoyed by the theatrical success of The Hangover, Pali Capital analyst Richard Greenfield July 10 said the $200 million box office comedy would likely be a “meaningful contributor” to Time Warner Inc.’s film revenue and earnings in fiscal-year 2009.
“Our [second-quarter] top-line and [fourth-quarter earnings before taxes] estimates could prove conservative,” Greenfield wrote in note.
Time Warner is parent to Warner Bros. Studios and Warner Home Video.
The analyst said Warner’s home entertainment division in the third quarter would experience initial tough comparisons with the same period in 2008 when the studio released Sex and the City: The Movie on DVD. That trend, however, would turn positive in the fourth quarter, according to Greenfield.
He said that despite the July 15 theatrical release of Harry Potter and the Half-Blood Prince likely having tough year-over-year comparisons with The Dark Knight, the studio wouldn’t be negatively impacted financially since the Batman movie was 50% produced and owned by third-party Legendary Pictures.
“The fourth quarter is shaping up well given the success of The Hangover (likely to be released on DVD in the quarter) and a likely Potter and Terminator: Salvation DVD versus The Dark Knight DVD and spillover from Sex and the City in the year-ago period,” Greenfield wrote.
Elimination of New Line Cinema, related personnel and 7% reduced overhead costs resulted a 17% increase in first-quarter (ended March 31) filmed-entertainment operating income to $214 million from $183 million during the prior-year period.
Filmed entertainment saw a 7% decline in revenue to $2.6 billion from $2.4 billion due to lower theatrical ticket sales and DVD sales — the latter negatively impacted by fewer home video releases and reduced catalog sales.
Time Warner reports second quarter results July 29.