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Warner’s Q3 Earnings No 'Deathly Hallows'

2 Nov, 2011 By: Erik Gruenwedel

'Harry Potter and the Deathly Hallows — Part 2'

Final 'Potter' movie helps Warner Bros. studio increase quarterly operating income by 162%

Warner Bros. Nov. 2 reported third-quarter (ended Sept. 30) operating income of $524 million, an increase of 162% from operating income of $324 million during the previous-year quarter.

The studio’s revenue, which includes Warner Home Video, increased 19% to $3.3 billion, compared with less than $2.8 billion last year. Notable revenue drivers included the theatrical performance of Harry Potter and the Deathly Hallows — Part 2 — the final movie in the popular franchise — and higher non-network fees (syndication, subscription VOD, pay TV) from the licensing of repurposed episodes from TV series “The Big Bang Theory.”

Home entertainment revenue, which includes disc and digital distribution of movies and TV shows, declined nearly 23% to $582 million from $749 million due to difficult comparisons from last year’s multiformat release of Clash of the Titans.

Specifically, home entertainment revenue from theatrical movies dropped nearly 22% to $421 million from $534 million. Home entertainment revenue from TV programming fell nearly 26% to $161 million, compared with $215 million last year.

CFO John Martin, in a call with analysts, said the year-over-year comparisons in home entertainment were impacted by a light release slate in the quarter.

“We didn't have anything of a similar large release [like Clash of the Titans] in this year's quarter,” Martin said, adding that the company's estimate of a 4% uptick in consumer spending in home entertainment is “encouraging” from recent trends. “We expect a significant improvement in home video for us in the fourth quarter as a result of a strong slate, which includes the final 'Harry Potter' film, Hangover 2, Green Lantern and Horrible Bosses.”

Time Warner CEO Jeff Bewkes said he was “really happy” with early results from the launches of UltraViolet-compatible releases Green Lantern and Horrible Bosses via movie recommendation website Flixster.com. Bewkes said he expects the platform to gain traction with consumers as more studios roll out UV-compatible titles and retailers create compatible storage systems.

The CEO said the site would be rolling out a “movie starter” kit on Flixster that enables users to get a free digital movie when registering with the site. In addition, a studio-agnostic storefront is forthcoming, allowing consumers to purchase movies from multiple studios with UltraViolet digital storage functionality.

Finally, the site will bow technology that allows users to convert their DVD collections into digital copies stored and accessed on UltraViolet.

“As home entertainment transitions to digital distribution, we think it is critical to make it more compelling and easier for consumers to buy digital [and physical] movies and to manage their collections,” Bewkes said.


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