Time Warner Earnings: The Hangover
by John Paczkowski
Posted on July 29, 2009 at 8:15 AM PT
Time Warner’s second-quarter earnings beat analysts’ expectations. But that’s not saying much, really. Profits fell 34 percent to $519 million, or 43 cents a share, from $792 million, or 66 cents a share, a year earlier. Revenue was down nine percent at $6.8 billion.
Still, both figures exceeded the estimates of analysts, who had expected earnings of 37 cents on revenue of $6.97 billion, according to Thomson Reuters.
Revenue at the conglomerate’s studio, Warner Bros., fell nine percent to $2.3 billion despite some surprise box office hits like “The Hangover.” Meanwhile, revenue at the Time Warner (TWX) networks division was up five percent to almost $3 billion, despite a three percent drop in ad revenue.
And what of AOL? Time Warner’s soon-to-be-spun-off Internet division continued to be an albatross hung round the company’s neck. Its revenue dropped 24 percent to $804 million, dragged down by weak advertising and a continued decline in subscribers. Operating income fell 28 percent to $165 million. (See table below; click to enlarge.)
In a statement, CEO Jeff Bewkes said that Time Warner is “on track to spin off AOL to our stockholders around the end of the year. Separating AOL will benefit both companies–enabling Time Warner to concentrate fully on our core content businesses and improving AOL’s operational and strategic flexibility.”
Let’s hope so.
Comments
Armstrong’s biggest problem is really the subscription access revenue. To be down almost 30% is nothing short of a disaster he has no solution for or can slow or prevent.
That sub revenue picture is a snapshot of how customers are voting on AOL’s value to them.
Apparently not even worth the $10.00 they pay each month.
Anyone remember just three years back when AOL had around 14M subs and monthly rates were north of $20?
AOL claims that the subscription business is “low cost”, meaning the operational critical mass for profitability is low. With the huge churn rate, that low cost aspect has about three months left before it starts running negative numbers.
I’ve commented before that Tim can flog, fire and replace AOL sales people, hire his no-experience in display ads and content buddies from Google and it will still not be possible to close the gap between ad revenue and the subscription access business.
All this spin about spinning AOL off in November to unlock greater value is total fantasy. TWX and Bewkes have been trying to sell AOL for the past four years, without any takers! November, at this rate of decline will not be a spin off of AOL, it will become a yard sale.
As smart as Armstrong may think he and his Imported Google Cronies are, there is no way their algorithms and automating of AOL sales will stop the slide AOL is in.
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Posted by Elliott Spitzer at July 29th, 2009 at 9:58 am