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Digital Media To Offset Slow Ad Spend For Time Warner Inc.

|Includes:Time Warner Inc. (TWX)
By IBISWorld Entertainment Industry Analyst Agata Kaczanowska

Time Warner Inc. (NYSE:TWX) has had its ups and downs over the past couple of years.  The company has significantly restructured and the market reaction indicates this change was for the better.  Today, the company’s fast-moving stock is taking off following the announcement that subscriptions of Time, Sports Illustrated and Fortune magazine’s will be free to print subscribers.  
The company’s primary business segments include television networks, filmed entertainment and publishing (including magazines and direct marketing).  Its businesses rely heavily on advertising spending, which fell at an annualized rate of 0.2% over the five years to 2011, despite a strong 11.5% rebound in 2010. Expected earnings per share are lower than a year ago as a result of slowed growth in the advertising segment, which is not anticipated to reach pre-recession levels until 2012. 
TWX is expected to make up 11.0% of the Cable Networks industry, 13.8% of the Movie Production industry, 8.5% of the Television Production industry and 8.7% of the Magazine Publishing industry in 2011.  Out of these segments, digital content is expected to most transform the TV network and magazine publishing segments of the company.
TWX's subsidiary, Turner Broadcasting System, owns and operates eight cable TV networks.  Turner's cable networks segment has grown at an annualized rate of 2.1% over the five years to 2011, driven by increasing viewership. Several hugely successful shows like The Office and The Closer are drawing audiences to Turner's channels. The company is also effectively transferring content from its networks to the Internet.  For example, CNN Digital Network ranked at the top for mobile news provider in current events and global news in 2010.  As a result of increasing advertising and subscription purchases, segment revenue is expected to grow 4.4% in 2011 to $1.8 billion.
In 2011, Time Inc.'s US magazines are expected to account for 20.0% of the total advertising revenue of US consumer magazines, excluding newspaper supplements, as measured by the Publishers Information Bureau. TWX's publishing segment revenue is anticipated to decline only 0.5% year on year to $3,694 million in 2011. This is a vast improvement over an 18.9% decrease in 2009, and marks an annualized drop in revenue of 5.7% over the five years since 2006.
Stocks: TWX