Profit dropped 10% for the corporate parent of Burbank-based Warner Bros. in the first quarter of 2011 even as revenue climbed and the studio expanded its ability to deliver movies online and prepares for the release of several major films.
On Wednesday, the studio’s parent company Time-Warner Inc. reported a profit of $653 million on revenue of $6.7 billion in the first quarter, compared with $725 million in profit on $6.3 billion in revenue in the same period last year.
Executives said Tuesday that the 10% drop in profit was due to a quiet quarter at the movies, as well as programming and promotional costs related to the month-long broadcast of the NCAA basketball tournament primarily on two Time-Warner networks, TBS and TNT. March Madness still managed to spur a 31% gain in network advertising revenue and higher network ratings.
“We knew the first quarter would be our most challenged from a profit-growth perspective,” Chief Financial Officer John Martin said, in part because of “the timing of our film slate, which is heavily weighted toward the second half of the year.”
In the coming months, Warner Bros. will release “Hangover II,” “The Green Lantern” and the final installment of the “Harry Potter” series.
Chief Executive Jeff Bewkes touted the company’s forays into digital delivery of movies and TV shows. This week, the company acquired Flixster, which operates the popular Rotten Tomatoes movie review site and streams films to users. Bewkes said Warner Bros. Home Entertainment Group will enhance the site’s capacity for movie sales and rentals.
The company also recently set a deal with Facebook to sell films on the social networking site, expanded the HBO GO system to iPads and other devices, and joined industry-wide plans to offer movies for digital sale 60 days after their theatrical release.
During a call with investors Tuesday, Bewkes rebutted a suggestion that the 60-day window be shortened in order to improve sales, and emphasized that it is not in the company’s interests to undermine theater operators.
“What nobody wants to do is cannibalize the theatrical window,” Bewkes said.
“That is a legitimate concern the exhibitors have, and it’s a concern that we share.”