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Time Warner Profit Falls

Nov 8, 2004  •  Post A Comment

A pair of large media companies reported profit declines last week as one-time charges offset gains at their respective television-related operations.

Time Warner last Wednesday reported an 8 percent decline in third-quarter profit to $499 million from a year-earlier $541 million, largely attributable to the creation of a $500 million legal reserve to be used to resolve federal investigations into accounting practices at the company’s America Online unit.

Revenue rose 5 percent to $10 billion, driven by a 10 percent increase in revenue at the company’s Time Warner Cable division. The cable operation’s growth came as a result of subscriber growth in high-speed data and digital cable.

Another factor contributing to overall revenue growth was the networks division, which includes Turner Entertainment Group and HBO as well as broadcaster The WB Network. The division saw revenue rise 8 percent to $2.2 billion, thanks to a gain in subscriptions and content sales. Advertising sales rose 8 percent, thanks to a 12 percent bump at Turner, which offset a 3 percent drop at The WB.

Meanwhile, Fox Entertainment Group, which is 81 percent controlled by Rupert Murdoch’s News Corp., last Wednesday reported a 20 percent decline in fiscal first-quarter profit, hurt by equity losses from its interest in satellite operator DirecTV Group.

Satellite Failure

FEG booked a profit of $320 million, thanks to its share of losses taken in connection with DirecTV, which booked charges related to a reduction in value of a pair of satellites as well as a cut in the sale price for DirecTV’s PanAmSat unit following the failure of a PanAmSat satellite. Revenue rose 5 percent in the quarter to $2.9 billion, driven largely by growth at the company’s cable networks and the Fox Broadcast Network.

Fox Broadcasting reported a narrowed operating loss in the quarter, while Fox Television Stations saw its operating income before depreciation and amortization remain unchanged. The cable unit’s operating income before depreciation and amortization surged, thanks to growth led by Fox News Channel, which boasted a 58 percent increase in operating income amid higher advertising revenue and a 37 percent increase in prime-time ratings.

Those results helped News Corp. earn a fiscal first-quarter profit of $536 million, a 27 percent increase over last year’s figure of $422 million. Revenue advanced 12 percent to $5.2 billion.