Box office failures hit profits at film arm of Time Warner
Saturday 05 February 2005
Time Warner, the world's largest media group, yesterday paid the price for the box office flops Alexander and Catwoman when it announced its film business suffered a 27 per cent slump in profit in the fourth quarter.
The film arm, which reported profits of $284m (£151m), was a blip in an otherwise strong three months in which the media giant increase net profit by 76 per cent, driven by a particularly strong performance in cable and television networks.
The weak results in films did not come as a surprise to Wall Street, after the epic about Alexander the Great failed to grab audiences and one reviewer described Catwoman, starring Halle Berry, as "kitty litter".
Time Warner, whose headquarters are in New York, was also struggling against a particularly strong comparison with last year, when results were boosted by The Lord of the Rings: The Return of the King.
Time Warner's troubled time at the box office in 2004 looked particularly poor in comparison with the performance of its rival, News Corp. According to Rupert Murdoch, News Corp' chairman, its Fox films division "thrived".
Time Warner pointed to sales at the cable group which rose 10 per cent as more customers subscribed to digital video and high-speed data services. Revenue at its television networks, which include HBO and TBS, increased 6 per cent.
Sales at the internet arm, America Online (AOL), rose 1 per cent and operating income grew 9 per cent despite subscriber losses. AOL lost 464,000 US subscribers in the third quarter and 2 million from the same period a year earlier. Operating income rose due partly to a gain from the sale of its Netscape Security Solutions business.
Time Warner, which is seeking an end to an investigation by the US Securities and Exchange Commission, said it would restate financial results from 2000 to 2003 to reflect accounting for a dot.com-era deal with Bertelsmann. It has already pledged to the Securities and Exchange Commission to pay $300m to settle charges.
Richard Parsons, the chairman and chief executive of Time Warner, said the company had concentrated in the past year on bringing this investigation to an end, so that it could concentrate on its future strategy at AOL and elsewhere. "We are now sort of operating a fully settled down Time Warner," he said.
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