News Corp, Time Warner to see boost in cable, ads
Cable network advertising growth and threats from online video services Netflix and Hulu will dominate investor attention when News Corp and Time Warner begin the earnings season for big media on Wednesday.
Big media companies are expected to show a sustained recovery as advertisers return to traditional TV spending, which is expected to persist through 2011.
The advertising rebound coincides with fresh threats from online services that offer TV shows and movies for under $10 per month. US cable TV subscribers pay on average $70 per month.
Time Warner is expected to report high single-digit gains in advertising revenue at its cable division, home to news network CNN, benefiting from advertisers opening up their wallets as the economy improves.
Rupert Murdoch's News Corp will see its cable networks boosted by advertising and rising fees from cable and satellite distributors. Analysts estimate that it will see mid-teens percentage gains.
Since late last year, Time Warner CEO Jeffrey Bewkes has attacked Netflix's business plans, batting down concerns that the streaming video and DVD mail service for movies and TV shows poses a challenge to Time Warner and its HBO premium pay cable channel. Earlier this month, Bewkes compared Netflix to a 200-pound chimp rather than an 800-pound gorilla.
HBO lost 1.5 million subscribers in 2010 and pegged the decline to a tough economy and the end of promotions.
Still, there is concern that consumers are dropping pricey cable subscriptions including to HBO - billed as a premium channel with content like "True Blood" and "Boardwalk Empire" - in favor of services from the likes of Netflix.
Analysts expect Time Warner's revenue to rise 2.2 percent to $7.48 billion in the fourth quarter. Earnings are forecast at 62 cents per share in the fourth quarter, compared with 55 cents a year earlier.
Meanwhile, Murdoch is trying to push through his bid to buy the 61 percent of BSkyB that News Corp doesn't already own. BSkyB, the UK's leading satellite TV provider, is a strong performer. By integrating it into the company, Murdoch would boost News Corp's valuation as its newspapers deal with falling ad revenue.
The UK must approve the deal, and investors worry that the $12.5 billion bid could be undermined by a phone-hacking scandal in the UK at its News of the World tabloid paper.
Analysts expect a decision on the deal this summer.
Analysts on average expect News Corp to post a profit of 28 cents a share on revenue of $8.7 billion, according to Thomson Reuters I/B/E/S, compared with a profit of 22 cents on revenue of $8.68 billion a year earlier.
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