Time Warner lifted by advertising rebound

Time Warner on Wednesday said that it had benefited from a strong rebound in television advertising, which sent its quarterly profit surging.

The company, which owns the Warner Bros film studio, HBO and CNN cable networks and People magazine, said that its first-quarter net profit rose to $725m, or 62 cents a share, from $467m, or 39 cents a share, a year earlier. Analysts had expected a profit of 48 cents a share.

Time Warner said that the results underscored a recovery in spending that could send its full-year profit even higher than it predicted.

Revenue rose 5 per cent to $6.3bn and operating profit rose 37 per cent to $1.4bn, on higher advertising revenue at its TV businesses.

Since shedding its cable operations and AOL last year, it has invested heavily in TV programming and reached a landmark 14-year, $10.8bn deal to co-license the college basketball championships with CBS. It also secured a deal with Conan O’Brien, a comedian and late-night talk show host, who fled NBC Universal this year after a high-profile battle with the network.

Time Warner has also sought to broaden its international portfolio by purchasing the stake in HBO Central Europe it did not own and fortifying its majority position in HBO Latin America.

One investment, a minority stake in Central European Media, has yet to pay off. Shares in the company, in which Time Warner owns a 31 per cent stake, are down 13 per cent.

Strong DVD sales of Sherlock Holmes helped boost the company’s bottom line in the first quarter, in spite of an industry-wide slump in home entertainment.

The results reflected News Corp and Viacom’s optimism in 2010 as media companies exited a brutal recessionary period. News Corp raised its fiscal year profit forecast, on the heels of growth in US and the UK across its cable, films and newspaper groups.

But Wall Street has raised the bar on media company performance after a strong sector wide rally has priced in the recovery in advertising.

News Corp shares fell 6 per cent on Wednesday after it disclosed that it would fall $100m short on film revenue.

Time Warner raised its full-year earnings per share outlook and now expects profit will rise at least by mid-teens percentage basis compared with last year.

Jeffrey Bewkes, chief executive of Time Warner, also confirmed that CNN was in discussions with other news organisations to pool news gathering resources.

People briefed on the plans said that CNN and CBS News have rekindled talks for the third time in 13 years.

“It’s entirely possible that the parties, and there could be other parties, could come into an arrangement that makes sense before next 12 months,” Mr Bewkes said.