Time Warner sees digital future

Warner Bros. Studios parent Time Warner Inc. plans in the coming months to aggressively dive into digital sales of new movies and TV shows, pushing into a new arena as DVD sales tail off.

On Wednesday, Time Warner Chief Executive Jeff Bewkes discussed plans for "TV Everywhere" in announcing third-quarter results for the media giant, owner of HBO, Time Inc. and Burbank-based Warner Bros.

Revenues were up 2% in the third quarter of 2010, reaching nearly $6.4 billion, largely due to a better television and print advertising market, according to the company. Profits declined from $662 million to $552 million, a 10% decrease.

Filmed entertainment revenues were flat at $2.8 billion. The Leonardo DiCaprio thriller "Inception," filmed partially on the Burbank set, made $800 million at theaters around the world, Bewkes said. He added that new cable television shows, including "Boardwalk Empire" and "Rizzoli & Isles," were among the winners for the company.

Television revenues grew from $2.8 million in the third quarter last year to $3 million this year.

Time Warner Chief Financial Officer John Martin said in a conference call with investors that the third-quarter movie results were a pleasant surprise, given that the third quarter of last year was driven by hits "Harry Potter and the Half-Blood Prince" and "The Hangover."

"We expected a decline," he said. "This comparison masks some really bright spots in the quarter."

Bewkes said the company is preparing for digital sales of films and TV shows shortly after they are released, allowing customers to choose whether they watch on TV screens, iPads, mobile devices, home computers or all of the above.

"Buy our content once, and use it in multiple places," he said.

By the second quarter of 2011, Bewkes said, Time Warner will have reached agreements with distributors on prices and timing of movie releases.

"We will help lead the industry to launch a premium video-on-demand service that will enable consumers to watch recently released theatrical movies at home, in high def and eventually in 3-D," he said.

Larry Gerbrandt, of Media Valuation Partners, said the major studios are well-positioned to move into digital sales, and that they have to adapt to what is seen as the permanent decline of DVD sales.

"They have to do something to replace the DVD window, and they also have to do something to counter Netflix," he said.

It's a matter of deciding when to pull the trigger and what window to use, as in how soon after theatrical release, Gerbrandt added, because the studios don't want to damage their theatrical business.

"Clearly digital distribution presents some new challenges for the industry," Bewkes said. "But we believe the opportunity significantly outweighs the risks."

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