The Dark Knight
By Erik Gruenwedel | Posted: 04 Feb 2009
The Dark Knight, the top-selling DVD in 2008, continues to put in overtime buttressing Warner Bros. from the ravages of the current economic tsunami.
However, DVD and Blu-ray Disc sales of the second Christopher Nolan-helmed Batman movie, as well as Sex and the City: The Movie and 10,000 B.C., couldn’t prevent the filmed entertainment group from losing 11% ($395 million) in fourth-quarter revenue (ended Dec. 31, 2008) compared to the same quarter in the previous year.
The filmed entertainment group includes Warner Bros. Home Entertainment Group. Packaged-media sales overall compared unfavorably year-over-year with sales of Harry Potter and the Order of the Phoenix, 300, Ocean’s 13 and I Am Legend.
The filmed entertainment segment reported a 7% ($18 million) rise in operating income to $271 million on $3.1 billion in revenue. The results are in stark contrast to The Walt Disney Co., which this week reported a 64% ($327 million) decline in studio entertainment operating income.
Time Warner CFO John Martin, in a call with investors, said the reduction in DVD and theatrical releases in the quarter curtailed P&A expenses 6%. He said that with just five new DVD releases slated in the current quarter, there would be difficult DVD comparisons compared to the previous-year period when the studio released 13 titles.
“The fourth quarter did benefit from Dark Knight, and obviously things would have been worse [without it],” Martin said. “We remain cautious regarding current DVD trends and we expect the industry to stay challenged as long as there is broader softness in consumer spending at retail.”
Time Warner CEO Jeff Bewkes said The Dark Knight was the second most profitable film in history after Titanic.
“The obvious thing we are going to take from that is more Dark Knight,” Bewkes joked. “We want to do that with Batman, Superman and Sherlock Holmes, perhaps. The sequels are performing as well as the originals. That didn’t use to be the case.”
He denied that a reported 24% downturn in TV DVD sales in the quarter was due to the widespread availability of the titles online and/or the digital video recorder.
“It is true home video sales were down in the quarter for us and the industry, but the A-titles and catalog have done well,” Bewkes said. “The B-titles have not done well, so that will be a bit of a challenge for everyone in the industry this year.”
Time Warner said additional filmed entertainment segment charges included $30 million in bad debt reserves for potential credit losses of Warner DVDs for several retail customers that have filed for bankruptcy, including Circuit City Stores.
Bewkes said previously announced staff reductions at Warner Bros. would result in $100 million in related charges in 2009, but would “pay for itself” in two years. He added that last year’s fold of New Line Pictures into Warner Bros. would generate about $140 million in annual savings.
Fiscal 2008 operating income in filmed entertainment dropped 3% ($22 million) to $823 million, based on a 2% ($284 million) decline in revenue to $11.4 billion.
For Time Warner overall, fourth-quarter revenue fell 3% to $12.3 billion. Full-year revenue increased $500 million to more than $46.9 billion.