Sluggish Entertainment and Publishing Results Hurt Time Warner Earnings

By AMY CHOZICK

A slow three months at the box office for Warner Brothers movies and continued sluggishness at Time Inc. magazines contributed to a 32.6 percent decline in net income at Time Warner.

The giant media conglomerate said on Wednesday that its net income for the three months that ended June 30 was $429 million, or 44 cents a share, compared with $637 million, or 59 cents a share, in the same period a year earlier. Revenue decreased by 4 percent to $6.7 billion and adjusted operating income fell 5 percent to $1.2 billion.

Revenues at the company's Warner Brothers film and television studio fell 8 percent to $2.6 billion, resulting largely from comparisons to a strong quarter in 2011. Last year, the studio released the hit film “The Hangover Part II” as well as the DVD of “Harry Potter and the Deathly Hallows: Part I.”

The company said it expects significant improvement at the studio this quarter because of the s uccess of “The Dark Knight Rises,” which has grossed more than $535 million worldwide since its July 20 release. The studio's stripper-with-a-heart-of-gold movie “Magic Mike” has taken in more than $100 million at the domestic box office since its release in June.

Revenues increased by 4 percent, to $3.6 billion, at the company's network business, which includes Turner Broadcasting's TNT, TBS and CNN and the pay cable channel HBO. Higher subscription and advertising revenues helped offset a 5 percent decline in content revenues. HBO had a particularly strong quarter in ratings and critical acclaim with shows like “Game of Thrones,” “True Blood” and “Girls.”

Ratings softness at CNN, while a small part of Time Warner's business, has continued to drag on the company's cable TV division. Last Friday, Jim Walton, the president of CNN Worldwide, said he would step down at the end of the year.

Jeffrey L. Bewkes, ch ief executive of Time Warner, reinforced his commitment to CNN but said he is not satisfied with the low ratings. “We think there's a very strong demand for objective, comprehensive, non-partisan coverage,” Mr. Bewkes said on a conference call with analysts. “But we need to do it in a very compelling, more engaging way than we've been doing of late.”

Time Inc., the publisher of 21 magazines including Time, People and Sports Illustrated, saw a 7 percent, or $36 million, decrease in advertising revenue and a decrease of 9 percent, or $88 million, in overall revenue. Operating income at Time Inc. fell 43 percent to $97 million.

Mr. Bewkes said the company thinks of Time Inc. not as a traditional publishing unit, but as a branded entertainment company with potential to grow on digital platforms.

“It's way too reductive to just think ‘publishing' has a constrained future,” he said. He added that he sees brands like People, InStyle and Real Simple â €œbecoming very vibrant on tablets.”