Time Warner's overall revenues grew 4 percent to $10.3 billion in the third quarter ended Sept. 30, although the drivers were almost exclusively higher revenues from company stalwarts cable and broadcast. Subscription revenues rose at AOL due to the signup of more broadband users but ad revenues dropped precipitously due to $36 million less in inter-company revenues and other factors. Ad revenues at the magazine unit dropped 2 percent to $565 million in the third quarter.
Ad revenues at Time Warner's broadcast and cable networks grew 14 percent to $603 million in the third quarter, led by 20 percent growth at The WB (which Time Warner shares with Tribune) and 12 percent at the Turner Networks. Time Warner said the scatter market was solid in the third quarter but declined to provide percentages, as some of its competitors have done. Ninety-eight percent of Turner's fourth-quarter commitments have become firm orders, said Chief Financial Officer Wayne Pace.
Speaking with Wall Street analysts during a conference call Wednesday morning, Chairman/Chief Executive Officer Dick Parsons noted that the broadcast networks had their worst-ever quarter in audience delivery, with cable garnering an aggregate of 54 percent of primetime audience. The first three weeks of the new season, Parsons said the seven networks (including The WB) are already off by 4 percent in adults 18-49 while ad-supported cable networks are up 8 percent in the aggregate.
Parsons said TBS and TNT are both growing at nearly twice that rate and that a key part of Time Warner's TV strategy was to position itself to take advantage of the shift in audience from broadcast to cable. He said ad dollars were migrating but not at the same rate as viewership but said that the Turner networks were already being used by advertisers and agencies as a substitute reach vehicle, and that more would come.
"We're confident that these ad dollars will follow the eyeballs," Parsons said. He said advertising revenues at Turner grew in the mid-teens in the third quarter.
Pace said the magazine unit, which includes Time and Fortune, was having "an uncharacteristically down" quarter. "A difficult magazine advertising environment is affecting everyone who is in this business," Pace said. He said the company remained encouraged by its position in the market, however, as the most recent Publishers Information Bureau (PIB) data showed Time Warner's magazines holding onto a 24 percent share of domestic ad revenues.
Time Warner wasn't particularly optimistic about some of its expectations for the fourth quarter, saying that both scatter and magazine advertising demand have been slow to recover.