Netflix was one of the best-performing stocks last year and
analysts said Time Warner wants more recognition from investors
for the strength of HBO and its streaming product, HBO Go, which
has a similar feel to Netflix. The effort to highlight the
digital aspect of its business comes as the company prepares to
spin off its slow-growth magazine publishing business Time Inc.
"Perhaps the Street should put a higher multiple on the HBO
business. It's the largest potential competitor to Netflix,
which is trading at such a high multiple," said Gabelli & Co
analyst Brett Harriss, adding HBO's performance last year was in
line with his estimates.
HBO, which said adjusted operating income rose 8 percent to $1.7
billion last year, is much more profitable than Netflix, but it
has also been around much longer and is growing more slowly.
Netflix posted $112.4 million in net income last year.
HBO's revenue increased 4 percent to $4.9 billion, compared with
Netflix's revenue which rose 21 percent last year to $4.37
billion. Time Warner Chief Executive Jeff Bewkes said HBO
recorded its biggest gain in domestic subscribers in 17 years,
about 2 million last year, a figure that includes subscribers
for HBO's sister channel Cinemax.
But these subscriber gains did not generate any revenue,
executives said, due to some of HBO's agreements with cable
operators that allow the providers to keep some of the money it
makes from subscribers.
"We definitely think, and we are doing it, that we can grow the
sub base," said Bewkes. "You can see the result of those
investments in programming and sub growth we have had in the
last couple years."
The company also said it would spin off its Time Inc publishing
unit in the second quarter and put $1.3 billion in debt on its
balance sheet. In contrast, when News Corp and Fox separated
last year, the publishing unit was not loaded with any debt and
it was given $2.6 billion in cash. Time Warner has not yet said
how much cash will be on the publishing company's balance sheet.
Turner, the other cable unit of Time Warner which runs networks
such as CNN and TBS, said domestic advertising was flat in the
quarter. Viacom Inc, which owns cable networks MTV and Comedy
Central, said last week that it saw a 3 percent rise in domestic
[to top of second column]
Time Warner's new finance chief, Howard Averill,
projected total advertising to grow in the mid- to high single
digits in the first quarter. He said ratings will continue to drag
while scatter pricing, or last-minute ad rates, will be up in the
high-single to low- double digits.
Revenue at its Warner Bros unit, which includes its movie studio,
rose 7 percent to $4 billion in the fourth quarter.
Its performance was helped by movies "Gravity,"
starring Sandra Bullock and George Clooney, and "The Hobbit: The
Desolation of Smaug," the second of a three-part adaption of J.R.R.
Tolkien's 1937 novel. Both movies grossed more than $300 million at
the global box office.
Time Warner's net income fell to $983 million, or $1.06 per share,
in the fourth quarter ended December 31, from $1.11 billion or $1.15
per share a year earlier. Excluding items, the company earned $1.17
Revenue rose to $8.56 billion. Analysts had expected earnings of
$1.15 per share on revenue of $8.39 billion.
Time Warner forecast 2014 adjusted earnings per share to increase by
a percentage in the low double digits from last year's figure of
$3.51 per share, excluding Time Inc.
Analysts on average were expecting earnings of $4.25 per share,
according to Thomson Reuters I/B/E/S. However, that forecast did not
fully take into account the Time Inc spinoff.
Time Warner authorized a share repurchase program of $5 billion,
compared to $4 billion a year ago and upped its dividend by 10
Shares rose 1.1 percent to close at $63.09 on the New York Stock
Exchange on Wednesday.
(Reporting by Liana B. Baker in New
York; additional reporting by Sruthi Ramakrishnan in Bangalore;
editing by Maju Samuel, Stephen Powell and Matthew Lewis)
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.