BENGALURU: Time Warner Inc., (Time Warner) reported increase in revenues and income – both operating as well as adjusted - due to increase across these parameters by all its segments - Turner, Home Box Office (HBO) and Warner Bros. The company’s total revenue increased 6 percent for the quarter ended 30 September 2017 (Q3-17, current quarter) to $7,595 million from $7,167 million for the corresponding year ago quarter (y-o-y). Total operating income increased 11.5 percent y-o-y in the current quarter to $2,245 million from $2,014 million. Total adjusted operating income increased 13 percent y-o-y to $2,339 million from $2,070 million. It may be noted that the company continues to expect its pending merger with AT&T to close before yearend 2017.

Time Warner chairman and CEO Jeff Bewkes said, “We delivered very strong third-quarter results, keeping us on track to achieve our objectives for 2017. Both Turner and Home Box Office achieved double-digit gains in Subscription revenues, including HBO’s highest quarterly growth in 13 years, while Warner Bros. had a terrific quarter in theatrical, which all contributed to us increasing Operating Income by 11 percent and Adjusted Operating Income by 13 percent. Warner Bros.’ latest blockbuster, It, followed other box office successes, including Annabelle: Creation, Dunkirk and Wonder Woman, which have earned Warner Bros. the #1 spot at the domestic box office so far this year. Turner boasted the #1 comedy across all television among adults 18-34 with Adult Swim’s Rick and Morty and TNT’s NBA Opening Night doubleheader averaged 4.9 million total viewers, up 53 percent compared to last year. CNN also maintained its strength as the #1 news network among adults 18-49 in both primetime and total day, and had its most-watched third quarter ever among total viewers.”

Bewkes continued: “Home Box Office’s creative excellence was again recognized at the Primetime Emmy Awards where HBO received more Primetime Emmys than any other network for the 16th consecutive year. The seventh season of Game of Thrones concluded during the quarter with an average of 33 million viewers, a record for an HBO original series. Our results and these highlights reflect our continued focus on executing our strategy, which includes both creating the most engaging content and advancing the ways that consumers can enjoy and experience our content and brands across platforms. The ability to accelerate our pace of innovation and connect more directly with consumers are among the reasons we are excited about our proposed merger with AT&T, which remains on track to close before year end, pending regulatory review and consents.”

Segment results

Turner

The segment reported 6.1 percent ($158 million) y-o-y increase in revenue for the current quarter to $2,678 million from $2,610 million. Operating income for the segment increased 7 percent to $1,243 million in Q3-17 from $1,162 million in Q3-16. Adjusted operating income increased 5.3 percent y-o-y in the current quarter from $1,267 million from $1,203 million.

Time Warner says that revenue at Turner increased due to increases of 13 percent ($186 million) in subscription revenues and 4 percent ($5 million) in content and other revenues, partially offset by a decline of 3 percent ($33 million) in advertising revenues. Subscription revenues benefited from higher domestic rates and growth at Turner’s international networks, partially offset by lower domestic subscribers.Content and other revenues increased due to higher licensing revenues. The decline in advertising revenues was due to lower delivery at certain domestic networks, partially offset by increases at Turner’s news businesses.

The company says that operating income at Turner increased ($81 million) to $1.2 billion due to the growth in revenues partially offset by higher expenses, including increased programming and marketing costs. Programming expenses grew 8 percent primarily due to higher original programming costs at Turner’s domestic entertainment networks. Marketing expenses increased mainly to support original series on Turner’s domestic entertainment networks.

Home Box Office (HBO)

HBO revenue increased 12.6 percent ($179 million) y-o-y in Q3-17 to $1,605 million from $1,426 million. Operating profits increased in Q3-17 by 4.2 percent y-o-y to $552 million from $530 million. Adjusted operating profits increased in the current quarter by 6.6 percent y-o-y to $565 million from $530 million.

Time Warner says that HBO revenue increased due to increases of 12 percent ($156 million) in subscription revenues and 14 percent ($23 million) in content and other revenues. Subscription revenues increased due to higher domestic subscribers and rates and international growth. The increase in content and other revenues was primarily due to higher international licensing and home entertainment revenues.

Operating income at HBO increased 4 percent ($22 million) to $552 million. The growth in revenues more than offset increased expenses, including higher marketing and programming costs. Programming expenses increased 7 percent due to higher original programming costs, primarily related to the timing of original series. The increase in marketing costs was related to HBO’s OTT products and original programming.

Warner Bros.

Warner Bros. is Time Warner’s largest segment in terms of contribution to overall revenue. Warner Bros revenue increased 1.7 percent y-o-y in the current quarter to $3,460 million from $3,402 million. Operating profit increased 25.7 percent to $538 million from $428 million. Adjusted operating profit increased 33 percent to $576 million from $433 million.

Time Warner says that Warner Bros. revenue increase of the segment reflected higher theatrical and videogames revenues partially offset by lower television revenues. Theatrical revenues increased due to higher home entertainment and television licensing revenues of theatrical product. Videogames revenues increased primarily due to carryover revenue from Injustice 2. The decrease in television revenues was mainly related to lower initial telecast revenues. 5

Operating Income at Warner Bros. increased due to the increase in revenues and higher contributions from this quarter’s box office releases, including It and Annabelle: Creation, as well as lower print and advertising costs due to fewer releases.