M+E Connections

As Time Warner continues to reap the rewards of the summer movie hit “Wonder Woman,” the company still expects that AT&T’s planned purchase of it will be completed before the end of 2017 – if the U.S. government doesn’t decide to block it that is, according to Time Warner CEO Jeff Bewkes.

The proposed merger “remains on track to close before year end, pending regulatory review and consents,” he said Aug. 2 in Time Warner’s earnings news release for the second quarter (ended June 30). The company didn’t hold an earnings call with analysts due to the pending merger, it said.

Time Warner shares were up 0.14% at $102.56 in morning trading after the company reported stronger results than it did a year ago thanks, in part, to the strong performance of the hit Warner Bros. movie “Wonder Woman.” The movie has earned about $800 million globally so far and is the third-highest grossing Warner Bros. movie ever at the domestic U.S. box office (at about $400 million), Time Warner said. It’s also the second-highest grossing movie overall of 2017 domestically as of Aug. 2, behind only Disney’s live-action “Beauty and the Beast.”

Total Time Warner revenue grew 5% from a year ago, to $7.3 billion, driven by sales growth across all the company’s operating divisions. Profit from continuing operations inched up to $1.1 billion ($1.34 a share) from $1 billion ($1.20 a share).

Warner Bros. revenue increased 12% to $3 billion thanks to higher theatrical and videogame revenues, but partially offset by lower TV revenue, Time Warner said. The increase in theatrical revenue was mainly due to the success of “Wonder Woman,” while higher home entertainment revenue came primarily from the release of “The Lego Batman Movie” and continued strength from “Fantastic Beasts and Where to Find Them,” it said. Videogame revenue was helped by a larger number and favorable mix of releases that included “Injustice 2” from Warner Bros. and DC Entertainment, it said.

But Warner Bros. operating income fell 28% to $223 million due to higher associated film costs and print and ad expenses mainly associated with the mix and number of film and games releases. Time Warner said. The company didn’t mention the movie “King Arthur: Legend of the Sword,” which it released in May and became one of the biggest box office bombs so far in 2017.

Turner revenue increased 3% to $3.1 billion behind a 13% increase in subscription revenues, but operating income in that division decreased 7% to $1.1 billion because of higher expenses including increased programming costs, Time Warner said.

HBO revenue inched up 1% to $1.5 billion, driven by an increase of 8% in subscription revenue, while operating income grew 10% to $531 million. HBO and its sister channel Cinemax recently launched on Hulu’s live and on-demand platforms, Time Warner noted.

The company still expects its 2017 full-year adjusted operating income to increase in the high single-digits, based on current foreign exchange rates, it said in a separate news release.

Time Warner expects Turner subscription revenue growth in the second half of 2017 to increase at a similar rate as in the first half of 2017, it said.  It expects HBO subscription revenue growth rate, meanwhile, will increase in the second half of 2017 relative to the second quarter of 2017 and its total revenue in the second half of 2017 will increase at a higher rate compared to the first half of the year, it said.

Despite the continued strength of “Wonder Woman” in July and the promising performance of the Christopher Nolan-directed World War II film “Dunkirk” since its July release, Time Warner is expecting Warner Bros. operating income growth to be more significant in the fourth quarter, it said. That’s based on the timing of this year’s theatrical release slate, especially the scheduled release of “Justice League” in the fourth quarter compared to the release of “Suicide Squad” in the third quarter last year, as well as the planned videogame release of “Middle-earth: Shadow of War” in this year’s fourth quarter, it said.