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Time Warner 2Q04 July 29, 2004

Posted by David Card in Uncategorized.
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Time Warner had a solid quarter. Overall revenues grew 10%, to $10.9 billion. Filmed Entertainment outgrew the other businesses, while AOL at 2% and Time Inc. at 4% were the slowest performers. TWX raised guidance for the year, but warned that tough comparisons with last year will mean slower Q3 growth.

Highlights from the earnings call:

AOL

– AOL ad revenue grew year over year for the first time since 3Q01. Advertising grew 23% to $221 million; $72 million of that was paid search, which grew 76%. AOL expects to have positive ad revenue growth for the full year, even without adding in the Advertising.com acquisition.
– AOL actually gained 85,000 paying subscribers, but “total membership” was down 668K due to losses in trial and retention licenses. The company said this big number was seasonal. Details are here.
– 3.6M BYOA for Broadband subs at the quarter’s end, up from 2.8M in Q1. About 40% of them are the $24.95 package that includes unlimited dial-up. The company said most of the net additions were for this package.
– AOL has 2.9 premium services subscribers, up from 2M at the end of Q1.

Cable and Broadband

– 4.6M digital subs; 42% of basic video subscribers. 124K net additions are seasonally weak.
– Monthly ARPU was over $75; up 10%.
– 1.3M SVOD subs; 28% of digital
– 600K DVR subs; just under 13% of digital
– 3.5M broadband (residential) subs; 19% of eligible homes passed. Roadrunner is growing well while the AOL broadband bundle is no longer actively marketed, and is losing customers. There are still 200K left.
– VOIP has paying customers in 15 of 31 systems (up from five in Q1), and seven other systems are in trial. In Raleigh, 70% of the VOIP users are in a triple-play package.
– No intention to cut cable bundle prices; no intention to take Time Warner Cable public.

Networks

– Ad revenues up 8% at Turner; up 6% overall. Pretty strong upfront and scatter market.

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