The Cable Crutch
The tough economy, lower TV ad revenues and other factors continue to weigh on big media content companies. But the cable and TV operations of News Corp and Time Warner Inc held their own during the quarter ending June 30, despite the economy’s uncertain headwinds. And it seems that cable strength is increasingly helping to prop up big media as many other divisions, such as publishing and some online assets, continue to flounder.
News Corp saw operating income at its TV division drop 28% to $279mln—but much of that resulted from lackluster ad revenue from local TV affiliates and its Fox broadcast net. The media firm’s overall net profit, however, was up 27% to $1.1bln because of strength in its movie studio division and—you guessed it—its cable TV operations, whose operating income rose $29mln compared the same time last year to $313mln. But overall results also benefited from recent sales, including the high-profile deal to sell its interest in Gemstar-TV Guide International to Macrovision. And as might be expected, strong results from Fox News and regional sports nets were offset somewhat by startup losses at the new Fox Business Network and Big Ten Network.
Meanwhile, Time Warner Inc faced a whopping 26% falloff in revenue in its 2nd quarter, with net income falling to $792mln from nearly $1.1bln the same time last year. But despite lower overall revenues, the company still slightly beat Wall Street’s expectations and managed to squeeze relatively good results out of its cable divisions. Operating income related to its stake in the now separately traded Time Warner Cable was $738mln vs. $711mln the same time last year. But it was Time Warner Inc’s cable nets overseen by Turner and HBO that truly shined, with operating income rising $749mln, up an impressive 18% over the same time last year. That’s twice the growth rate of overall revenues at the nets (9%). Within Time Warner’s cable content universe, subscription revenues grew 10% to $158mln, and ad revenues rose 11% to $89mln. Of course, programming expenses rose 8% to $1.1 billion, due primarily to an increase in sports programming costs at Turner, related particularly to NBA programming, higher original programming costs at both HBO and Turner, and costs related to international acquisitions.
Overall, News Corp and Time Warner Inc posted respectable results, especially considering the economic environment. Where there was weakness, it usually didn’t stem from cable operations. In the case of News Corp, soft spots surrounded its broadcast operations. In the case of Time Warner Inc, softness stemmed from the AOL albatross still hanging around its neck (Time Warner has officially said it will spin off the AOL unit, whose operating income plummeted 36% and continues to drag down the company’s results quarter after quarter). Bottom line: Cable content continues to drive some of the best performance metrics for big media.
Here’s a rundown of some other recent cable content earnings:
Rainbow Media reported 12% rev growth in Q2, including a 6% increase in affil rev and 22% ad rev growth owing to higher CPMs and units sold at AMC and WEtv. Optimum Lightpath grew net rev 20% and CVC’s VoIP service now has more than 2mln phone lines in service. RGU’s swelled by 260K, up sequentially (2.6%) and YOY (9%).
CBS’ TV group reported a 2% increase in 2Q rev to $2.2bln, powered in part by 5% growth in affil rev due to rate increases and sub growth at Showtime and CBS College Sports Network. Ad rev declined 6% due to local softness and lower prime ratings.
Outdoor Channel Holdings posted net income of $271K for Q2 compared with a net loss of $1.1mln in the prior-year period. Revenues of $13mln were up from $11.4 mln. And interestingly, ad revenue leaped 28% to $8.5mln from $6.6mln in the prior-year period.
CableFAX Content Business also recently covered the earnings of Viacom and The Walt Disney Company: http://www.cablefaxcontentbusiness.com/financial_center/news/386.html
