CEO upbeat on Warner Bros. profit

When it comes to talking smack about the movie business, just leave Warner Bros. out of it.

That’s the word from Time Warner Chief Executive Jeff Bewkes. On a conference call with analysts Wednesday, Bewkes said Warner Bros. was marching toward its most profitable year ever.

There’s a “perception that film is inherently a low-return or volatile business,” Bewkes said, referring to widespread negativity about the movie industry this year amid wrenching changes in consumers’ viewing habits and a rash of cost-cutting. “That’s certainly not true and hasn’t been true for Warner Bros. . . . Despite the softness in home video overall this year, Warners is on pace to report its highest profits ever.”

In preemptive comments before taking questions, Bewkes pointed to the studio’s strong summer at the box office driven by hits including “The Hangover,” “Harry Potter and the Half-Blood Prince” and “The Final Destination,” as well as its television successes including “Two and a Half Men” and “The Big Bang Theory.” Recent movie releases such as “Where the Wild Things Are” and “The Informant” have produced more modest results, although the studio has had no significant flops since March’s “Watchmen.”

Last year, Warner Bros. went through a major round of cost cutting, most notably by folding New Line Cinema into the main studio and shutting its specialty film division, Warner Independent Pictures.

Bewkes told analysts that, outside of write-offs related its disastrous 2000 merger with AOL, Warner Bros.’ return was “certainly well above its cost of capital,” and that the studio’s operating income would top $1 billion by the end of 2009.

Studio revenue, however, was down 4% to $2.78 billion in the third quarter.

Time Warner’s chief financial officer, John K. Martin, said that was nonetheless well above expectations given problems in the home video business -- a main driver of movie industry revenue -- as well as a difficult comparison with 2008, when the mega-hit “The Dark Knight” was released. Warner Bros.’ operating income rose 6% to $291 million.

Parent company Time Warner on Wednesday reported that revenue fell 6% to $7.14 billion from a year earlier. Advertising revenue was down 12%, however, amid an overall weak market. Net income plunged 38% to $661 million, or 55 cents a share.

Major drags on the company were Web portal AOL and magazines. Time Warner said it would take a $100-million restructuring charge for its Time Inc. magazine unit as it lays off more employees and cuts back the frequency of business magazine Fortune.

Despite the doom and gloom, the company reiterated that it has no plans to unload or shut Time Inc., as has been rumored. Publishing unit revenue was down 18% to $914 million, with advertising off 22% and subscriptions down 13%.

As for AOL, Bewkes emphasized that a planned spin-off of AOL, which saw revenue slide 23% in the quarter, was on track for completion by year’s end.

Time Warner’s networks group, which includes HBO, TNT and TBS, saw revenue rise a healthy 5% to $2.87 billion, primarily because of jumps in subscription revenue.

Time Warner raised its guidance for full-year adjusted earnings per share from $1.98 to $2.05. The company’s shares fell 6 cents to $30.10.

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ben.fritz@latimes.com