Time Warner reported lower net income as programming costs rose and revenue at its Warner Bros. unit declined.
Net income fell to $952 million, or $1.21 per share, from $971 million, or $1.18 per share, a year ago.
Revenues fell 5% to $7 billion.
“We had a strong first half of 2016, which puts us ahead of our original goals for the year. Our performance reflects the creative excellence resulting from investments we’ve been making in the very best content. At the same time, we’re capitalizing on new distribution opportunities to take advantage of the growing demand for high-quality video content around the world,” said CEO Jeff Bewkes.
Bewkes pointed to Time Warner's purchase of a 10% stake in Hulu for $583 million as an example of how the company was committed to providing content to consumers across a variety of platforms.
For the full year, Time Warner raised its business outlook, saying it expects adjusted diluted income per common share from continuing operations to be between $5.35 and $5.45. In May, it reaffirmed that it expected earnings to be in the $5.30 to $5.40 range.
Second quarter net income was above Wall Street expectations, but revenue was less than expected. Time Warner shares were up more than 3% in mid-day trading.
Operating income at Turner Broadcasting was flat at $1.1 billion. Programming costs were up 11% because of higher spending on sports and original programming. Marketing costs were also up.
Revenues at Turner were up 6% to $3 billion. Subscription revenues were up 6% and advertising revenues were up 6%, boosted by the men’s college basketball finals. Content and other revenues were down.
Turner expects to have a low single digit ad revenue increase in the third quarter because it will air fewer original programming hours to avoid competition with the Olympics, said CEO John Martin. The scatter market conteinues to be healthy, with prices up in the double digits from last year's upfront, and in this year's upfront Turner got cost increase in the double-digit range.
At HBO, operating income fell 5% to $481 million. Expenses were higher because of increased programming, restructuring and severance costs. Programming costs were up 6%. Amortization was lower because HBO is using its older programming longer than expected.
Revenues were up 2% to $1.5 billion as subscription revenues rose 6%. Content revenues were down 17%.
Operating income at HBO was down 10% to $308 million. Revenues were down 19% because of lower video game, home entertainment and television licensing revenues. A year ago, the company benefited from the second-cycle syndication of The Big Bang Theory and the SVOD sale of Seinfeld to Hulu.