Tags: TWX | media | cable | stocks

At Time Warner, Content is Still King

By    |   Tuesday, 04 Oct 2011 12:02 PM

Time Warner (TWX) owns the successful cable TV networks HBO, CNN, TNT, and TBS. Its Warner Bros. unit, including subsidiary New Line Cinema, is the biggest filmmaker in the world. Warner Bros. also produces TV shows.

Time Warner’s magazine publishing arm includes top sellers People, Time, and Sports Illustrated. The company is expanding abroad, with about 30 percent of its revenue produced there.

Cable networks generate about 70 percent of the company’s cash flow, according to Morningstar, and they are sitting pretty. They pull in money from both subscriber fees and advertising. New competitors aren’t much of a worry. It’s hard for a new network to gain traction. Barriers to entry are high.

The growth of TV content over the Internet could threaten Time Warner at some point in the future but hasn’t hurt them much so far. In the second quarter, revenue for the cable networks rose 9 percent from a year earlier.

Strength in sequels

Warner Bros. provides 20 percent of cash flow, according to Morningstar. Its steady stream of hit movies and TV shows gives it a deep library of content. In the second quarter, the division’s revenue climbed 13 percent amid strong sales for video games such as Mortal Kombat 9 and LEGO Pirates of the Caribbean in addition to DVD sales of "Harry Potter and the Deathly Hallows: Part 1."

Time Warner’s total profit rose 14 percent to $638 million in the second quarter from a year earlier. Revenue gained 10 percent to $7.03 billion.

Standard & Poor’s analyst Tuna Amobi has a four-star buy rating on Time Warner shares. He sees “solid ad commitments from the 2011-12 cable TV upfront market and a strong film lineup featuring several major franchise sequels, . . . including Harry Potter 7 - Part 2, The Hangover 2, Sherlock Holmes 2, Happy Feet 2, The Dark Knight 2, The Hobbit 1.”

The company next reports around Nov. 2.

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Time Warner (TWX) owns the successful cable TV networks HBO, CNN, TNT, and TBS. Its Warner Bros. unit, including subsidiary New Line Cinema, is the biggest filmmaker in the world. Warner Bros. also produces TV shows. Time Warner s magazine publishing arm includes top...
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2011-02-04
Tuesday, 04 Oct 2011 12:02 PM
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