By : Erik Gruenwedel | Posted: 03 Feb 2010
Buoyed by the retail resilience of its DVD and Blu-ray Disc movies, Time Warner Inc. CFO John Martin said the company’s studio segment would increase the number of titles released into the home entertainment market in 2010, especially on Blu-ray, compared to last year.
Time Warner’s film unit includes Warner Bros. Studios and Warner Home Video, among other properties.
“While we expect sales of DVD movies to remain somewhat challenged, we expect continued growth of higher margin Blu-ray, VOD and electronic sellthrough to help offset this pressure,” Martin said in a call Feb. 3 with investors.
Time Warner CEO Jeff Bewkes, who lauded disc revenue for The Hangover, said the studio would again release all films in 2010 on VOD, day-and-date with DVD and Blu-ray Disc due to the format’s superior margins.
He said the lowest margin business model continues to be the rental kiosk, which is why he suggests it fall behind other distribution channels, including a sellthrough window earmarked by last month’s groundbreaking deal with Netflix.
“We’re hopeful that we can provide an example of what can work in putting out rational windows,” Bewkes said. “We want to make our titles available to consumers in the earliest windows, whether they buy them or rent them physically or electronically.”
Redoubled confidence in packaged media, due to strong DVD/Blu-ray sales of Harry Potter and the Half-Blood Prince and The Hangover, contributed to the filmed-entertainment unit reporting fourth-quarter (ended Dec. 31) operating income of $436 million, up 61% from operating income of $271 million during the previous-year period.
The results marked the seventh consecutive quarter of pre-tax earnings growth for the film segment. Revenue for the quarter increased $205 million to $3.3 billion due in part to video game sales of new releases LEGO Indiana Jones 2: The Adventure Continues and LEGO Rock Band.
Indeed, games, for the fiscal year, generated $500 million revenue to filmed entertainment’s annual revenues of $11 billion, according to Martin.
When asked how offering HBO content streams for free online (via nascent HBOGo.com) to cable subscribers would grow incremental revenue, Bewkes said the value-add enhances subscriber growth, which in turn the company can leverage for higher premiums at the affiliate level.
“I think cable operators are going to refocus their efforts on premium TV categories and putting out these enhancements in order to remain competitive,” Bewkes said.
Indeed, both Time Warner Cable and Comcast both reported significant declines in video subscribers and transactional VOD as consumers downsize monthly cable bills in the ongoing recession.
The studio generated more than $4 billion in global box office revenue in 2009, a record for a single studio. Bewkes said seven Warner titles surpassed $100 million in ticket sales, including Half-Blood Prince, Sherlock Holmes, The Blind Side, The Hangover, Terminator: Salvation, Watchmen and He’s Just Not That Into You.
The CEO said he remains upbeat on this year’s tentpole releases, including a seventh Potter film; Sex in the City 2; Inception, from Dark Knight director Christopher Nolan; Due Date, from Hangover director Todd Philips; and Clash of the Titans and Guardians of Ga’Hoole in 3D.
Bewkes said the studios would further mine the DC Comics catalog of characters for theatrical releases, direct-to-video titles and video games — with announcements coming in the coming weeks.