NEW YORK (TheStreet) -- Time Warner is making the case that it doesn't need 21st Century Fox (FOX) and isn't worried much about declining TV advertising. That's because the owner of HBO, TBS and CNN is getting higher and higher fees from cable- and satellite-TV providers both in the U.S. and internationally.
Shares of Time Warner were climbing 3.4% to $77.53 on Wednesday, extending its 2014 gain to 11.2% compared to a 9.3% advance for the S&P 500.
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Watch the video below for a look at Time Warner's latest quarterly results:
These so-called affiliate fees have increased through the first three quarters of 2014, gaining 7% to 8% to 10%. Yes, total advertising fell 2% for the three-month period ended Sept. 30 compared to the same period a year ago with domestic ad-sales little changed. Ratings have "remained a headwind," acknowledged finance chief Howard Averill, and audience numbers for October "seem to be getting worse, not better," down 15% compared to the same period a year ago, wrote Bernstein Research media analyst Todd Juenger on Wednesday.
But as Time Warner has renegotiated contract with Comcast (CMCSA) , Time Warner Cable (TWC) and others, advertising has less of an effect on operations.
"Going forward, the drop in advertising is just not a big deal for them because their revenue is driven by affiliate revenue," said Vasily Karasyov, media analyst at Sterne Agee in a phone interview from New York. "Advertising is less of a factor."
Like its media brethren at Fox and Discovery Communications (DISCA) , Time Warner's television networks are experiencing a decline in advertising. But unlike Discovery, which depends on global advertising for more than half of its revenue, the slippage in TV advertising isn't significant enough to have a meaningful impact on Time Warner's earnings. Time Warner gets about 60% of its revenue from its television channels, the bulk of that from affiliate fees.
Fact is that Time Warner makes most of its money from cable- and satellite-TV providers around the world who pay to carry its many networks. And that comes even as Time Warner remains in a contract dispute with Dish Network, whose chief executive, Charlie Ergen on Tuesday called his decision to remove CNN, the Cartoon Network and TruTV on Oct. 21 a "non-event." Dish's contract with TBS and TNT is set to expire later this year.
"We disagreed with virtually everything [Ergen] said," Turner Broadcasting CEO John Martin said on Wednesday in a conference call with investors. "It's unclear what the dispute with Dish is." Martin countered that Time Warner has been supportive of Dish's efforts to start a standalone digital service, adding that "we're working hard to get a deal done."