Media Giants Gain in Q4

2/07/2011 12:01 AM Eastern

The advertising market continued its
upward path in the fourth quarter, with three of the top
cable programmers reporting strong gains.

Time Warner Inc., News
Corp. and Viacom all reported
double-digit domestic ad-sales
growth in the period ended Dec.
31, building on the momentum
from earlier in the year.

Time Warner kicked off the
week, reporting its fourth quarter
and year-end results, which
outpaced analysts’ estimates.
Revenue at the media giant rose
6% in 2010 to $26.9 billion, its
highest growth rate since 2004.
Adjusted operating income rose
17% to $5.4 billion, the highest
level in the media giant’s history.

For the fourth quarter, revenue
was up 8% to $7.8 billion,
and adjusted operating income
rose 14% to $1.4 billion.
Driving that full-year growth
was an 11% rise in revenue and
an 18% uptick in adjusted operating
income at its networks
division, which includes cable
stalwarts CNN, HBO and Turner
Broadcasting System. Time
Warner said that in the fourth
quarter, revenue at the networks
rose 14% to $3.3 billion, and adjusted
operating income was up
20% to $904 million. Advertising
revenue increased 21% in the
quarter to $1.1 billion and was
up 14% for the year to $3.7 billion.

At News Corp., cable networks
reported a 21% increase in operating
income in its fiscal second
quarter. Advertising revenue for the cable segment was up
12% in the period.

On the broadcast side, operating income at its television
stations and the Fox broadcast network increased five-fold
to $159 million in the period. The increases at both the cable
and broadcast divisions come despite a loss of ad revenue
from two high-profile carriage battles.

On a conference call with analysts to discuss the results
last week, News Corp.
said carriage disputes with
Dish Network (where its FX
Network, National Geographic
and 19 regional sports channels
went dark for about a
month) cost the company $30
million in lost revenue. An October
dispute with Cablevision
Systems, involving broadcast
stations in the New York metro
area and some cable channels,
resulted in about $17 million in
lost ad sales.

Still, on a conference call
with analysts to discuss results,
News chief operating officer Chase Carey said the battles
were worth it, predicting that
the broadcast business could
generate $1 billion in operating
income in the near future.

“We have retrans agreements
in place with four of the larger
distributors and have now set
the market for our broadcast
business,” Carey said on the
call. “As we continue to secure
new agreements over the next
couple of years we will be taking
this business to a whole new
level of profitability.”

In a research note, Collins
Stewart media analyst Tom
Eagan called News Corp.’s results
“very solid,” adding that
the media giant beat his estimates
for revenue and operating
income growth. And while Eagan
was impressed with Carey’s retrans convictions, he noted
one caveat.

“We expect that the [Federal Communications Commission]
might try to revise the retransmission
rules, lowering some of
the broadcast negotiating leverage,”
Eagan wrote.

At Viacom, domestic ad revenue rose
10% in the fiscal first quarter, ahead of
8% growth in the previous period. Viacom
said on a conference call with analysts
that it expects the momentum to
continue into the second quarter, with
both domestic and international ad
sales rising in the double-digits.

Time Warner chairman and CEO
Jeff Bewkes also expects the growth
train to keep rolling in 2011, projecting
that earnings per share would rise
in the “low teens” percentages for the
year. The media giant also increased
its dividend by 11% and increased its
share repurchase authorization to $5

Broadcasting & Cable business editor
Jon Lafayette contributed to this report

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