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Cable, Nets Help to Boost Time Warner in 1Q

4/28/2004 10:20 AM Eastern

Time Warner Inc.’s filmed-entertainment, cable and networks units led it to a productive first quarter.

Companywide operating income before depreciation and amortization rose 27% to $2.4 billion on a 9% revenue gain to $10.1 billion, the company said Wednesday.

Time Warner Cable's operating income before depreciation and amortization climbed 9% in the quarter on an 11% increase in revenues. The unit’s operating income rose 8%.

The MSO’s subscription revenues grew 11%, driven by increased penetration of high-speed data and advanced digital-video services, as well as higher basic-cable rates. High-speed-data revenues increased 32%, or $100 million, while advertising revenues climbed 7%.

Time Warner Cable added 137,000 net digital-video subscribers during the quarter to reach a total of 4.5 million, or 41% of basic-video-cable subscribers.

In addition, at the end of the first quarter, the MSO had 458,000 subscribers to its digital-video-recorder service and 1.2 million subscription-video-on-demand subscribers, representing 10% and 26% of digital-video customers, respectively.

Basic-video-cable subscribers remained essentially flat versus the year-ago quarter.
The MSO added 193,000 net residential high-speed-data subscribers in the quarter for a total of 3.4 million, or 18% of eligible homes passed.
In addition, Time Warner Cable said it remains on track to deploy digital telephony to essentially all of its divisions by the end of 2004.

As for the media giant’s networks, operating income before depreciation and amortization rose 47% in the quarter on a revenue gain of 5%. Operating income rose 51%.

Subscription and advertising revenues both saw double-digit increases during the quarter, offset in part by a decline in content revenues.

The subscription-revenues gain of 10% resulted from higher subscription rates at Turner Broadcasting System Inc. and Home Box Office, as well as, to a lesser extent, an increase in subscribers at Turner.

The company said advertising revenues rose 12% -- with 14% growth at the Turner networks and a 6% increase at The WB Television Network -- due primarily to higher costs per thousand homes at both Turner and The WB, as well as higher sell-out rates at Turner.

Programming expenses declined 3% ($23 million) in the first quarter due largely to a scheduling shift in original series and original movies at Turner, as well as incremental war-related newsgathering costs and $8 million in restructuring costs.

The 2004 first quarter results also include a $7 million loss related to the sale of Turner's winter-sports teams.

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