Time Warner posts 7% jump in second-quarter profit

Conan O’Brien hasn’t even started appearing on TBS and parent company Time Warner Inc. is already bragging about his effect on its bottom line. Although O’Brien’s late-night show doesn’t premiere on the cable network until November, advertising sales for the show are brisk, Chief Executive Jeff Bewkes said Wednesday.

“We saw strong demand for Conan O’Brien,” he said in a conference call with analysts Wednesday to discuss the company’s second-quarter earnings, adding that the late-night host’s upcoming show was drawing an ad rate per 1,000 viewers similar to what he previously attracted on NBC.

Time Warner, whose holdings include TBS, TNT, CNN, HBO and Time Inc., said second-quarter net income rose 7% to $562 million in the quarter ended June 30 compared with the same period a year earlier. Revenue was up 8% to $6.4 billion. Time Warner credited a strong advertising market. Ad revenue was up 14% at the Turner networks, the biggest such increase in six years.

Total revenue for Time Warner’s networks group, which includes the pay cable network HBO, increased 11% to $3.17 billion. Ad revenue wasn’t the only growth engine. There was a 9% increase to $1.85 billion in subscriptions, the fees paid by cable and satellite operators to carry Time Warner’s cable channels. Operating income grew 14% to $981 million.

Bewkes told analysts that his company has seen significant increases both in the upfront market, when advertisers buy time in advance of the new season, and the scatter market, when they purchase time piecemeal during the season.

Chief Financial Officer John Martin said it was unclear how long the recent ad growth could last. “While it may be difficult for us to maintain quite the pace of this quarter’s growth, we do expect another quarter of strong advertising growth in the third quarter,” he said.

The conglomerate’s film and TV studio Warner Bros. was the one division to see a slight drop in adjusted operating income, to $173 million from $176 million, though revenue grew 8% to $2.5 billion. The studio saw higher costs for production and advertising in the quarter ended June 30 and had some box-office disappointments in “Jonah Hex” and “The Losers.” Home video revenue was down 8%, Martin said, but revenue from digital distribution grew by a sizable 50% and now represents nearly 20% of the studio’s total home video pie.

In response to an analyst’s question, Bewkes said Warner Bros. has seen a positive effect on DVD sales and video-on-demand from the deals it struck with Redbox and Netflix to hold back its movies from being available for rental through those services until 28 days after they launch. However, other studios that offer their movies via Redbox’s $1-per-night kiosks and Netflix’s subscription service at the same time they go on sale, such as Paramount Pictures, have said they have seen opposite results.

Time Warner shares rose 11 cents, or less than 1%, to $32.47.