Time Warner Q4 Earnings Up Slightly, Thanks in Part to Harry Potter (Updated)

Investments in Harry Potter, HBO and NCAA men’s basketball all rewarded Time Warner in 2011

Time Warner reported increased revenue and profits in the final quarter of 2011, as the "Harry Potter" franchise and its cable networks fueled a strong year for the media conglomerate.

The company also announced the repurchase of 136 million shares for $4.6 billion, a new $4 billion stock repurchase authorization, and an 11 percent increase in its quarterly dividend.

Revenue increased by five percent in the fourth quarter of 2011 from the same period in 2010, reaching $8.2 billion. Profits were up to $773 million, or 76 cents per share, from $769 million or 68 cents per share. Adjusted earnings came to 94 cents per share, beating analysts expectations of 87 cents per share.

"We had a strong year operationally, not only maintaining our leading position across almost all of businesses, but in most cases we took [market] share," CEO Jeff Bewkes said on the earnings call.

In full-year results for filmed entertainment, the company said revenues rose 9 percent to $12.6 billion, led by the strong theatrical and home entertainment performance of "Harry Potter and the Deathly Hallows: Part 2" and the home entertainment performance of "Harry Potter and the Deathly Hallows: Part 1."

Bewkes said the Potter franchise, the most successul in film history, would continue to reap dividends thanks to theme park attractions like "The Wizarding World of Harry Potter" that launched in Orlando and will soon come to Los Angeles.

Nor is the film revenue going to dry up. Bewkes forecast another strong year from the studio in 2012 thanks to a slate that includes "The Hobbit," "Dark Shadows" and "The Dark Knight Rises," which is already selling out IMAX shows in advance of its July release.

Investing in big-budget releases isn't all that the Time Warner chief executive was proud of. Bewkes also boasted about the company's strategy of releasing its films to physical DVD retailers in windows, saying it had "enabled our titles to significantly outperform comparable titles released by other studios without a window."

Time Warner has already negotiated an extension of its window with Netflix to 56 days, and the company is looking to similarly extend its current 28-day windows with Redbox and other retailers.

And what of Ultraviolet, the cloud-based film ownership format? Bewkes insisted on Time Warner's continued support, believing it will only grow its user base in 2012.

"It's certainly early, but consumer response reinforces how much pent-up demand exists for an easy way to manage and access digital movie collections," he told analysts.

While film and its extensions to home entertainment were the focus for much of the earnings call, Time Warner's television production studio and cable networks boosted the earnings as well.

Its networks made up the biggest portion of the company's revenue in 2011, growing nine percent from 2010 to $13.7 billion. While both subscription and advertising revenues increased, the greatest surge came from content revenues, with HBO original programming and Turner licensing driving the growth.

When asked by analysts about HBO GO, Bewkes insisted it would not dent the premium channel's profitability.

"We think of it really as what we've already seen over the years of video on demand, which rasied viewing and helped stabilize the subscriber base," Bewkes said. "It's the same thing with Go." He did lament that some affiliates had inhibited the spread of Go to all devices, citing "friction."

The company also benefitted from higher television license fees, which increased mainly to worldwide syndication that included the off-network availability of "The Big Bang Theory."

Finally, revenues were also helped a stronger videogame release slate, including "Batman: Arkham City," "Mortal Kombat 9" and several LEGO titles.

Despite a strong earnings release, the company's share price is up just one percent in trading as of 9 a.m. PT.