In 2012, HBO aired three of the top five rated original series in its history and received the most Primetime Emmy awards of any network for the eleventh year in a row. In recent months, HBO extended its domestic output deals with both Twentieth Century Fox and Universal Pictures well into the next decade, helping solidify its position as the leading premium pay television service for first-run theatrical films. During 2012, HBO launched premium pay television services in the Netherlands and the Nordic region and announced plans to launch a premium pay television service in India. At the 70 th Annual Golden Globe Awards, HBO won five awards, the most of any network, including Best Television Series – Comedy or Musical for Girls and Best Mini-Series or Motion Picture Made for Television for Game Change.
Revenues increased 5% ($166 million) to $3.7 billion, including increases of 7% ($144 million) in Subscription revenues and 3% ($38 million) in Advertising revenues, partially offset by a decrease of 9% ($29 million) in Content revenues. Similar to the full year results, the increase in Subscription revenues resulted mainly from higher domestic rates and, to a lesser extent, an increase in domestic subscribers at HBO and international growth, partially offset by the negative effect of foreign currency exchange rates. Advertising revenues benefited from domestic growth due to higher pricing, an increase in the number of NBA games and higher ratings at CNN due to the 2012 U.S. presidential election. This growth was partly offset by decreases at Turner’s international networks, which were due primarily to the shutdown of the Turner operations in India and Turkey, described above, and the negative effect of foreign currency exchange rates. Content revenues decreased due mainly to the shutdown of the TNT television operations in Turkey. Adjusted Operating Income rose 17% ($192 million) to $1.3 billion, driven by revenue growth and lower expenses, including lower programming expenses due to timing. Operating Income rose 21% ($240 million) to $1.4 billion.
FILM AND TV ENTERTAINMENT (Warner Bros.)Full-Year Results Revenues decreased 5% ($620 million) to $12.0 billion, due mainly to difficult comparisons to 2011. The prior year included significant revenues from the last two Harry Potter films, videogame revenues from Batman: Arkham City and Mortal Kombat 9 and television license fees from the off-network availabilities of The Big Bang Theory and Friends. The decline was offset in part by an increase in initial telecast fees, international syndication revenues and new subscription video-on-demand distribution agreements. Adjusted Operating Income declined 3% ($42 million) to $1.2 billion, due mainly to lower theatrical and videogames revenues, offset partially by higher television revenues and lower print and advertising costs due to fewer theatrical releases during the year. Operating Income decreased 3% ($35 million) to $1.2 billion. In 2012, Warner Bros. films grossed $4.3 billion at the worldwide box office, led by The Dark Knight Rises and The Hobbit: An Unexpected Journey, ranking #2. Warner Bros. also achieved the #2 spot in domestic box office share in 2012, with $1.7 billion. In 2012, Warner Bros. remained #1 domestically in overall home entertainment and in each of DVD sales, Blu-ray Disc sales, VOD and EST. For the 2012-2013 television season, Warner Bros. has produced over 55 broadcast and cable series and is again the leading supplier of primetime programming to the broadcast networks. Season-to-date through January 27, Warner Bros. accounts for six of the ten top comedies on broadcast TV, including The Big Bang Theory, TV’s #1 comedy series. At the 70 th Annual Golden Globe Awards, Warner Bros. won two awards, including Best Motion Picture – Drama for Argo. For the 85 th Academy Awards, Warner Bros. films received 10 nominations, including Best Picture for Argo. Fourth-Quarter Results Revenues decreased 4% ($167 million) to $3.7 billion, due mainly to difficult comparisons to the year ago period. The prior year’s quarter included revenues from the home entertainment release of Harry Potter and the Deathly Hallows: Part 2 and from the videogame release of Batman: Arkham City. The decline was offset in part by the global theatrical performance of The Hobbit: An Unexpected Journey and Argo. Adjusted Operating Income increased 28% ($122 million) to $555 million due mainly to the timing and performance of theatrical releases, lower print and advertising expenses, and mix of television product, offset partially by the decline in home entertainment and videogames revenues. Operating Income increased 29% ($125 million) to $552 million. PUBLISHING (Time Inc.) Full-Year Results Revenues declined 7% ($241 million) to $3.4 billion, reflecting decreases of 5% ($104 million) in Advertising revenues, 5% ($61 million) in Subscription revenues and 21% ($83 million) in Other revenues. Advertising revenues decreased due to lower magazine advertising demand, partly offset by revenues from SI.com and Golf.com, the management of which was transferred from Turner to Time Inc. during the second quarter of 2012. The decrease in Subscription revenues was due primarily to lower domestic and international newsstand sales. Other revenues declined mainly due to the absence of Time Inc.’s school fundraising business, QSP, which the Company sold in the first quarter of 2012. For the year, the transfer of SI.com and Golf.com benefited Advertising revenues and negatively impacted Other revenues by similar amounts. Adjusted Operating Income decreased 20% ($117 million) to $463 million due to the decline in revenues, offset partially by cost savings initiatives. Operating Income decreased 25% ($143 million) to $420 million. Time Inc.’s 2012 share of overall domestic advertising was 21.5%, up from 21.0% in 2011, again leading the industry (Publishers Information Bureau data).