Box Office Slump Can't Stop Gains at Time Warner in Third Quarter

The home entertainment market proved the saving grace for Time Warner (News - Alert), who posted a rise in third quarter profits earlier today. This came despite news that the theatrical film releasing division lost some significant ground over that same period, showing rather conclusively that the gains for Time Warner were found in individual homes as opposed to the box office.

Time Warner's net income gained some significant ground over this time last year, posting $838 million for the quarter--86 cents a share--up from $822 million this time last year, or right around 78 cents a share. Given that Wall Street had projected 82 cents a share, this was welcome news indeed for shareholders. The biggest driver of these gains was in home entertainment, as Turner, CNN and HBO drove the Networks unit up four percent to $3.3 billion in revenue, and drove operating income up 12 percent to $1.2 billion.


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But the news was not all good for Time Warner, who saw big drops in its film and television units. The year-to-year on that division was down 12 percent, now at $2.9 billion. The release of major titles like comic book sequel "The Dark Knight Rises" and stripper drama "Magic Mike" weren't enough to stem the tide and drop operating income down to $330 million.

What's the takeaway from all this? It seems that more people are staying out of theaters and staying home instead. The cable networks made great inroads, but the thought of driving to a theater with gas at around $4 a gallon to spend around $10 on a movie ticket--especially when the cable bill represents maybe four to five times that for the month--seems to be leaving more viewers cold. In a down economy like the one we've been struggling through for years now, people watch their spending more closely, and spending the equivalent of a month's cable bill on a night at the movies for four just doesn't seem as attractive as it once did, especially when cable puts up entertainment most of the day and night.

There have been many to suggest that the theater as we know it is on its way out, thrown over in favor of rapidly improving home theater systems, improving options in terms of streaming viewing at home, and ever-climbing prices at the theater. While that likely won't happen for some time--if ever, completely--it's clear that the idea of staying home and watching television is gaining ground for a lot of people over actually going to the movies.