Time Warner and Walt Disney post low profits in last quarter due to decline in advertising sales

Time Warner and Walt Disney reported low results in the fourth quarter after suffering from weakening advertising sales. News Corp has sought to cut costs as well and is feared to follow the same trend.

Time Warner forecast profit in 2009 to be flat with the previous year as it grapples with weakening advertising sales that caused its fourth quarter results to fall below Wall Street expectations. Walt Disney Co reported a sharply lower-than-expected quarterly profit as the global downturn hurt its TV advertising, DVD sales and theme parks, pushing its shares nine per cent lower.

"What it would say is that most entertainment conference calls are going to bring gloomy news of an increasingly challenged advertising environment," said Barclays Capital entertainment analyst Anthony DiClemente.

Time Warner said yesterday advertising revenue dropped at its AOL internet unit and Time Inc magazine publishing business in the fourth quarter. Revenue at its Warner Bros film studios also fell slightly. Time Warner forecast 2009 income, excluding special items, to be flat with last year's 66 cents a share. It said the estimate excludes Time Warner Cable, which will be completely split off in the current quarter, but includes around $250 million (Dh918m) in previously announced restructuring charges related to AOL and Warner Bros.

Collins Stewart analyst Thomas Eagan said the outlook was below his forecast describing it as "conservative because there's not much visibility in the market".

Warner Bros, producer of movies such as The Dark Knight, said earlier last month that it would cut 800 jobs, while AOL plans to cut about 700 jobs.

Time Warner posted a fourth-quarter net loss of $16bn, or $4.47 a share, including write-downs, versus a profit of $1.02bn or 28 cents a share, a year earlier.

Excluding one-time items, profit was 23 cents a share, below the average analyst expectations of 26 cents, according to Reuters estimates.

Revenue fell three per cent to $12.3bn, below the $12.6bn expected by Wall Street. Declines in advertising revenue at AOL and Time Inc were partly offset by strong performances at its cable networks, such as CNN and HBO, which posted revenue increases in both affiliate fees and advertising.

The company's majority-owned cable service provider, Time Warner Cable, also reported an eight per cent rise in revenue growth as it added more phone and broadband customers. But the unit lost around 119,000 basic video subscribers. Time Warner said last month it would take a $25bn charge related to the depressed value of Time Warner Cable assets and other impairment charges.

Meanwhile, Disney continues to see softness in ad sales at its ABC broadcast network and ESPN cable sports network, though advance bookings at its domestic theme parks are up slightly this quarter, CFO Tom Staggs told analysts.

Disney Chief Executive Robert Iger warned, however, that in addition to economic pressures, the company was "experiencing secular changes" in consumer behaviour that could have long-term impact on its broadcast television and DVD sales.

Iger told analysts the company was looking at "very significant" overall cost reductions, including "reducing costs of distribution, production and marketing".

The company said last month that it was cutting hundreds of jobs at its theme parks, ABC Media Group and ESPN, and consolidating ABC's production and network businesses.

Disney's fiscal first-quarter net profit declined 32 per cent to $845m, or 45 cents per share, from $1.25bn, or 63 cents per share, in Q1 last year. Excluding gains from the sale of investments in Latin American pay-TV services, earnings fell to 41 cents per share versus a comparable consensus estimate of 50 cents, according to Reuters estimates. Revenue fell eight per cent to $9.6bn from $10.45bn a year earlier, short of a Wall Street forecasts for $10.04bn.

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