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Warner Bros. Theatrical a Core Growth Driver for Time Warner

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Warner Bros. in fiscal 2Q16

Time Warner’s (TWX) Warner Bros. had revenues of $2.7 billion in fiscal 2Q16, a decline of 19% year-over-year. Revenues were pulled down by declining home entertainment, television licensing, and video games revenues. Warner Bros. had an operating income of $308 million in fiscal 2Q16, a decline of 10% over fiscal 2Q15. Adjusted operating income was $217 million, a decline of 37% year-over-year.

Time Warner also stated that in the 2016–2017 television season, “Warner Bros. will produce 65 series for the upcoming season across all networks and services.”

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Theatrical distribution revenues a core growth driver

Time Warner is pursuing a strategy of driving revenue growth across Warner Bros.’ theatrical distribution, television, and video games businesses over the next couple of years. In fiscal 2016, the company intends theatrical distribution revenues for Warner Bros. to be the primary growth driver.

Time Warner indicated at the company’s fiscal 2Q16 earnings call that in the quarter, the company’s theatrical distribution revenues benefited from carryover revenue of the movie Batman v Superman. The company was also pleased with the box office performance of its recent releases The Conjuring 2 and Central Intelligence.

Time Warner’s The Legend of Tarzan has already brought in more than $300 million at the global box office. But the company doesn’t expect the movie to have much of an impact on this year’s profits.

The company also expects its home entertainment revenues to improve in the rest of the year due to a strong theatrical slate. In fiscal 2016–2020, it expects to release about 17 movies from its DC, Lego, and World of Harry Potter franchises.

The company said at the Deutsche Bank (DB) investor conference earlier this year that a core part of Warner Bros.’ strategy is to leverage its intellectual property and monetize it effectively.

Time Warner believes that some of its television programming that’s centered on its franchises can result in increased sales for its Consumer Products business and video game sales.

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