DVD sales boost profits

Time Warner Inc., the parent company of Burbank-based Warner Bros., reported record quarterly profits this week for the start of 2010, fueled in part by strong DVD sales.

Operating income for the New York-based owner of CNN, HBO, Time Magazine and other media properties jumped 37%, compared with the first quarter of 2009, to $1.4 billion, the company reported.

“We posted our best revenue growth in almost two years and the most profitable quarter in our history,” Jeff Bewkes, Time Warner's chief executive, said in a conference call with investors.

Revenues grew 5%, to $6.3 billion, compared with the same period a year ago, the company said.

Net income over the first three months of the year grew about 10%.

Revenues for Warner Bros. jumped 2% during the quarter, to $2.7 billion, mostly because of a larger amount of video releases and strong sales for “The Blind Side” and “Sherlock Holmes.”

Box office revenues from the release of “Valentine's Day” also contributed, the company said.

And an unexpected strong performance from “Clash of the Titans,” which has earned at total of $430 million worldwide, also boosted earnings, said John Martin, Time Warner's chief financial officer.

The result was a 43% jump in operating income for Warner Bros., which released 10 titles on home video in the quarter compared with five put on the market in the first quarter of 2009.

The strong results boosted the optimism of Time Warner executives, who said they were increasing their profit expectations for the year.

An upcoming slate of theatrical releases, including “Harry Potter and the Deathly Hallows: Part 1,” “Inception” and “Sex in the City 2,” along with recent announcements from Time Warner helped build expectations after the strong start to the year, Bewkes said.

“There is a lot in the pipeline, so on the high side if that does very well we could have a very strong year,” Bewkes said.

A recent agreement with Netflix and Redbox could help boost revenues, he said, because it will make Warner Bros. movies available to those DVD and Blu-ray Disc rental services only after a 28-day window.

“Keep in mind that we typically sell 75% of our DVDs in those first four weeks after release,” Bewkes said.

Bewkes added that the company may also pursue Metro-Goldwyn-Mayer Inc., a film studio that is struggling to pay billions of dollars in debt.

Although Time Warner already has a “robust production business,” the company is not ruling out an acquisition of MGM, he said.

“We don't need to increase capital into the business, but having said all that, if there's a compelling opportunity for returns?.?.?.?We're not averse to putting capital to work,” Bewkes said.

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