Blog Post

Earnings: Time Warner:$1 Billion Profit For 2Q06; AOL Freed; Time Inc. Disappoints;

A busy morning for Time Warner — earnings, new free broadband strategy for AOL, unwinding Time Warner’s partnership with Comcast, and more. We’ll detail the changes at AOL in other posts.
On the earnings front, Time Warner (TWX) reported a profit of just over $1 billion, or $0.24 per share, for 2Q06, a substantial improvement over a loss of $409 million, or $0.09 per share in 2Q05. Revenue rose slightly to $10.7 billion from $10.5 billion the previous year. Results were driven by double-digit gains at Time Warner Cable and Filmed Entertainment and a single-digit bump for Networks.
Looking at the numbers from a different direction, subscription — roughly half of TW’s revenue — and advertising income were up overall while revenue from content dropped.
Time Inc.: The segment was singled out by Chairman and CEO Dick parsons as a disappointment but he and COO Jeff Bewkes said they expect year-end results to be better, reflecting increased traction online and cost cutting. Revenues dropped 2 percent, or $29 million, to $1.3 billion. Decreases included a $23 million dip in subscription. Time Inc.’s share of domestic advertising through June 30 was 22.8 percent.
AOL: Revenues down 2 percent to $2 billion … better than expected but still hammered by an 11 percent drop in subscription revenues. The bright light — and the foundation of the changes at AOL being detailed later this morning by TW execs — is advertising, which was up 40 percent to $129 million. AOL Europe showed a profit of about $30 million.
Time Warner Cable: A subscription-revenue jump of 16 percent — $358 million — helped push TWC revenue to $2.7 billion, up 15 percent. HSD revenue was up 23 percent with an increase of 230,000 subs while advanced digital services rose 21 percent. Nearly one-third of TWC’s digital video subs subscribe to DVR services at the end of 2Q06 while TWC digital phone subscribers totaled 1.6 million. Average revenue per sub: up 14 percent to about $91.
— Last month, Comcast exercised its right to dissolve its Texas and Kansas City cable joint venture, representing 1.6 million subscribers. As a result, TWC will take full ownership of Kansas City, Southwest Texas and New Mexico systems while Comcast gets the Houston system.
Update: From the earnings call: Asked about TW’s registration for the wireless spectrum auction and ongoing wireless plans, Bewkes said the compnay wouldn’t discuss its wireless spectrum plans and brought up the Sprint-cable consortium: “We think we can work to develop co-branded, next generation wireless in that agreement and with those partners and we’ll see about how things come out and what we decide to do in the spectrum auction.”
Bewkes on Time Inc.: “We do expect Time Inc. to grow its profits in the year overall because we think that we’re going to have some improvement in the advertising climate and we’re starting to see that at a few of our key titles, particularly Time and People. We are getting increased traction online, most notably at SI.com and at CNNmoney.com … It’s really a combination of moving our powerful titles into digital and continuing to perform well in the print advertising business.”
Earnings | Slides | Webcast | Transcript (via SeekingAlpha.com)