The big story, of course, is that AOL revenue and income are both down from a year ago. Publishing is down in both areas, too, but no one seems to be mentioning that. If you're looking for good news, there's a lot of it: cable income is up significantly and both "Filmed Entertainment" and "Network" categories show some strong growth in income.
0:25 James Barge, SVP of Investor Relations, takes the mic. He explains the company's odd and non-GAAP measures, including (quite a mouthful) adjusted OIBDA (operating income before depreciation and amortization). It excludes some items, like "non-cash asset impairments" and amounts from sales of business lines. It seems like a sensible financial measure but it's hilarious to hear someone say it. [This from a girl whose friends, it must be admitted, tell accounting jokes to one another. Did you hear the one about EBCOSITDA? Oh, never mind.]
2:07 The company sold Time Warner Book Group and has shown these results as
"from discontinued operations."
3:01 An impressive disclaimer.
3:30 CEO Dick Parsons takes over. He sounds like a Virginian... gravelly and comfortable in his skin... but it turns out he's "from the mean streets" of Bed-Stuy, a New Yorker through-and-through. The "solid results" will "position us well" to meet 2006 expectations. He's proud of the $1.6 billion in free cash flow, and "robust growth" in Time Warner cable. He calls the decline at AOL "anticipated" and says that the drop is because last year was just so high. Ahh.
5:05 The source of the growth this quarter: Time Warner Cable delivered the best quarter in its history (in Dick's opinion). Added 82,000 basic subscribers - more than they did in all of last year.
6:38 'We know how to compete' in cable, and they believe that -- despite the naysayers -- they will continue to increase their competitive position. 'While the phone companies are only starting to dig up your yard, cable is already in your house, providing the best products and services available.'
7:23 Eager to complete Adelphia Cable acquisition - received FTC approval, awaiting FCC action and resolution to creditor issues in Adelphia bankruptcy. Expect to complete it by end of next quarter.
8:11 AOL time. They are 'encouraging more subscribers to move proactively to broadband,' and raised price of unlimited access plan to drive members to adopt broadband. Results so far have 'largely been in line with expectations.' Hopeful that they will be able to predict stablization later this year - boy that's not a strong statements.
9:25 Advertising revenue was up 26% this quarter, evenly distributed across all three types of advertising - display, paid search, and Ad.com performance-based advertising. Sales force is doing well. Hope to drive more traffic, and continue to monetize the audience effectively. Expanded partnership with Google will give them momentum.
10:25 Studios and networks squarely on track; Time, Inc. division was less robust than expected, consumer magazine division is struggling with lower ad sales.
11:06 Share repurchase program - $8 billion of stock bought back so far, almost 10% of outstanding shares.
11:56 In talks with Liberty to purchase the 50% of Court TV the company doesn't already own. Also in discussions with Liberty regarding its ownership of TimeWarner.
12:30 CFO Wayne Pace gives a very facts-oriented overview of the results. Nothing you can't see in the release. There is a 'nice' 18% increase in adjusted diluted EPS to $0.20. Re-affirming full year outlook (which is kind of hazy - "high-single-digit growth in OIBDA").
16:02 Segment highlights, starting with cable (first in the alphabet and in the hearts of Time Warner management!). Huh, ad revenues fell 2% 'due to softness in local and national advertising.' Now had 21 consecutive quarters with double-digit year-over-year growth. They're very proud.
18:12 DVR customers grew 212,000 in quarter, 56% increase over net additions and bringing their penetration of digital subscribers to 30%. Now 8% of service-ready homes have phone service.
18:56 Prior-year revenues from Ocean's Twelve, Constantine and Million Dollar Baby mean that this year is down in comparison. Despite this, OIBDA grew thanks to Harry Potter and Wedding Crashers digital sales.
19:48 Networks revenue growth with higher rates at Turner and HBO. Everybody Loves Raymond series end hurt results a bit.
21:02 Nothing new on AOL results. Expect 2nd quarter OIBDA to decline, as well, and then improve for the rest of the year.
22:10 What the heck is ARPU? It sounds like an alien snack food. Ahh... average monthly subscription revenue per user for AOL. It's down to $18.43, which seems a bit more than 'slight' to me. But I don't really know from ARPU.
23:12 Publishing essentially flat; growth from acquisitions of Essence and Grupo Editorial Expansion, plus launches such as Life.
24:18 Question time! My favorite. First up is my buddy Anthony Noto from Goldman Sachs (ok I talked to him on the phone once. We're tight). He wants to know about the 26% year-over-year growth in ads -- wants to know if it's better sell-through -- and wonders if lower subscription rates will affect pageviews. They say that AOL has kept pace, or done better, than online competitors with regards to monetization, and part of that is from Doubleclick and Ad.com. Also, the Google arrangement will benefit them.
Doesn't really answer the pageview question; but says that the whole decreased subscription rate thing is part of their plan! And will increase at the end of the year.
27:04 Jessica Reif-Coen, Merrill Lynch, wants to know about cost-cutting and intergration with Court TV, and wants detail on the margin expansion in Filmed Entertainment. Says they will use the great people over there to continue to increase the original programming. Trying to calm fears of headcount slashing there. But seems like they would cut some operations staff. As far as Filmed Entertainment, revenues were down, OIBDA were up - dramatic increase in margins - due to help coming from the home video release of Harry Potter and Wedding Crashers (previously mentioned), and also sold some international rights to distribution partners, which impacted OIBDA and not revenue; plus in last year's first quarter there was a writedown that didn't have a correspondent this quarter.
33:05 Michael Nathanson, Sanford Bernstein, asks how broadband strategies work, in terms of conversion; and how Filmed Entertainment will do for the rest of the year. They don't give specific guidance for the division -- they're pleased with their performance and that's all they're saying. With regards to broadband -- umm, ahh, hem, haw. It's working the way they want. Newer broadband distributors have more trouble hooking customers to DSL, but established ones have less trouble. When were the new distribution deals online, he asks? Not until the end of January/early February. They're still ramping up, and hoping to see better results in the third quarter.
35:45 Lowell Singer, SG Cowan, has a question about the difficult ad environment for the magazine business -- what kind of revenue growth do you see, and is that traditional ad revenue or other new sources of dollars? The answer is fuzzy - lifestyle magazines are having a great year, but there are weaknesses in auto ads, for instance. In the longer term, they might acquire properties (like Golf.com) or strength in existing brands (hella happy with CNN Money online), basically their strategies are to keep readership strong and to continue to drive brands online. Also, they're working on costs.
38:12 Richard Greenfield, Pali Research, asks about the EBITDA growth of the cable unit -- why are there lower margins year-over-year? -- and wonders if the great cable business means that they want to own all of cable within Time Warner. They say that advertising numbers are offsetting the high subscription numbers in cable, and that's the reason that margins were lower. Dick says he is bullish on cable, "the guys are shooting the lights out," because of the bundled phone offering being so much easier to sell, even to people who've turned down Time Warner Cable in the past. But they're committed to the deal they've struck with Adelphia and Comcast.
41:02 Deutsche Bank's Doug Mitchelson asks about slowdown in Turner ad growth -- is the cable network business as a whole a single-digit or double-digit ad growth longterm? Wayne's not concerned with the weakness in Turner Cable, he's excited about the upcoming Stephen King miniseries, as well as Closer and Saved. As for ad growth? High single-digits for the short run, and he's not giving any guidance for long-term.
43:07 William Drewry from Credit Suisse -- question too boring for words. The bottom line: they expect to move AOL customers from broadband to narrowband, and that will decrease narrowband costs.
45:02 Gordon Hodge, Thomas Weisel Partners wants to know about the trends in home video, and wants to know if they're going to buy Univision (like they're going to just answer that!). They say that Time Warner has a strong catalog in TV inventory for DVD, as well as movies, but the worldwide growth is definitely poor. Univision: "clearly a terrific company, great business targeted at an attractive demo." They don't comment in transactions. Surprised?
47:55 Kathy Styponias, Prudential, asks Dick about the $1 billion he'd planned to take out of Time Warner's cost structure. Dick says he's on plan to meet $500 million in cost reductions this year and is working on budgeting for the same deal in 2007. The cost cutting affected every division, including corporate.
50:42 Jason from Citigroup wants to know about the strategy for AOL Europe. [Chuckles from Dick and Wayne.] They've been doing well against European competition, but are evaluating its ownership structure and are looking to make it more profitable.
And with that, it sounded as if Dick couldn't push the "off" button on the conference phone fast enough. It was very abrupt. Maybe they were eager to see the market open in just a few minutes! And now, at about 1:30 p.m., the stock is down $0.30 to $17.12 on relatively normal volume, about where it's been all day. Shareholders don't seem thrilled, but no one's storming the gates.
3:01 An impressive disclaimer.
3:30 CEO Dick Parsons takes over. He sounds like a Virginian... gravelly and comfortable in his skin... but it turns out he's "from the mean streets" of Bed-Stuy, a New Yorker through-and-through. The "solid results" will "position us well" to meet 2006 expectations. He's proud of the $1.6 billion in free cash flow, and "robust growth" in Time Warner cable. He calls the decline at AOL "anticipated" and says that the drop is because last year was just so high. Ahh.
5:05 The source of the growth this quarter: Time Warner Cable delivered the best quarter in its history (in Dick's opinion). Added 82,000 basic subscribers - more than they did in all of last year.
6:38 'We know how to compete' in cable, and they believe that -- despite the naysayers -- they will continue to increase their competitive position. 'While the phone companies are only starting to dig up your yard, cable is already in your house, providing the best products and services available.'
7:23 Eager to complete Adelphia Cable acquisition - received FTC approval, awaiting FCC action and resolution to creditor issues in Adelphia bankruptcy. Expect to complete it by end of next quarter.
8:11 AOL time. They are 'encouraging more subscribers to move proactively to broadband,' and raised price of unlimited access plan to drive members to adopt broadband. Results so far have 'largely been in line with expectations.' Hopeful that they will be able to predict stablization later this year - boy that's not a strong statements.
9:25 Advertising revenue was up 26% this quarter, evenly distributed across all three types of advertising - display, paid search, and Ad.com performance-based advertising. Sales force is doing well. Hope to drive more traffic, and continue to monetize the audience effectively. Expanded partnership with Google will give them momentum.
10:25 Studios and networks squarely on track; Time, Inc. division was less robust than expected, consumer magazine division is struggling with lower ad sales.
11:06 Share repurchase program - $8 billion of stock bought back so far, almost 10% of outstanding shares.
11:56 In talks with Liberty to purchase the 50% of Court TV the company doesn't already own. Also in discussions with Liberty regarding its ownership of TimeWarner.
12:30 CFO Wayne Pace gives a very facts-oriented overview of the results. Nothing you can't see in the release. There is a 'nice' 18% increase in adjusted diluted EPS to $0.20. Re-affirming full year outlook (which is kind of hazy - "high-single-digit growth in OIBDA").
16:02 Segment highlights, starting with cable (first in the alphabet and in the hearts of Time Warner management!). Huh, ad revenues fell 2% 'due to softness in local and national advertising.' Now had 21 consecutive quarters with double-digit year-over-year growth. They're very proud.
18:12 DVR customers grew 212,000 in quarter, 56% increase over net additions and bringing their penetration of digital subscribers to 30%. Now 8% of service-ready homes have phone service.
18:56 Prior-year revenues from Ocean's Twelve, Constantine and Million Dollar Baby mean that this year is down in comparison. Despite this, OIBDA grew thanks to Harry Potter and Wedding Crashers digital sales.
19:48 Networks revenue growth with higher rates at Turner and HBO. Everybody Loves Raymond series end hurt results a bit.
21:02 Nothing new on AOL results. Expect 2nd quarter OIBDA to decline, as well, and then improve for the rest of the year.
22:10 What the heck is ARPU? It sounds like an alien snack food. Ahh... average monthly subscription revenue per user for AOL. It's down to $18.43, which seems a bit more than 'slight' to me. But I don't really know from ARPU.
23:12 Publishing essentially flat; growth from acquisitions of Essence and Grupo Editorial Expansion, plus launches such as Life.
24:18 Question time! My favorite. First up is my buddy Anthony Noto from Goldman Sachs (ok I talked to him on the phone once. We're tight). He wants to know about the 26% year-over-year growth in ads -- wants to know if it's better sell-through -- and wonders if lower subscription rates will affect pageviews. They say that AOL has kept pace, or done better, than online competitors with regards to monetization, and part of that is from Doubleclick and Ad.com. Also, the Google arrangement will benefit them.
Doesn't really answer the pageview question; but says that the whole decreased subscription rate thing is part of their plan! And will increase at the end of the year.
27:04 Jessica Reif-Coen, Merrill Lynch, wants to know about cost-cutting and intergration with Court TV, and wants detail on the margin expansion in Filmed Entertainment. Says they will use the great people over there to continue to increase the original programming. Trying to calm fears of headcount slashing there. But seems like they would cut some operations staff. As far as Filmed Entertainment, revenues were down, OIBDA were up - dramatic increase in margins - due to help coming from the home video release of Harry Potter and Wedding Crashers (previously mentioned), and also sold some international rights to distribution partners, which impacted OIBDA and not revenue; plus in last year's first quarter there was a writedown that didn't have a correspondent this quarter.
33:05 Michael Nathanson, Sanford Bernstein, asks how broadband strategies work, in terms of conversion; and how Filmed Entertainment will do for the rest of the year. They don't give specific guidance for the division -- they're pleased with their performance and that's all they're saying. With regards to broadband -- umm, ahh, hem, haw. It's working the way they want. Newer broadband distributors have more trouble hooking customers to DSL, but established ones have less trouble. When were the new distribution deals online, he asks? Not until the end of January/early February. They're still ramping up, and hoping to see better results in the third quarter.
35:45 Lowell Singer, SG Cowan, has a question about the difficult ad environment for the magazine business -- what kind of revenue growth do you see, and is that traditional ad revenue or other new sources of dollars? The answer is fuzzy - lifestyle magazines are having a great year, but there are weaknesses in auto ads, for instance. In the longer term, they might acquire properties (like Golf.com) or strength in existing brands (hella happy with CNN Money online), basically their strategies are to keep readership strong and to continue to drive brands online. Also, they're working on costs.
38:12 Richard Greenfield, Pali Research, asks about the EBITDA growth of the cable unit -- why are there lower margins year-over-year? -- and wonders if the great cable business means that they want to own all of cable within Time Warner. They say that advertising numbers are offsetting the high subscription numbers in cable, and that's the reason that margins were lower. Dick says he is bullish on cable, "the guys are shooting the lights out," because of the bundled phone offering being so much easier to sell, even to people who've turned down Time Warner Cable in the past. But they're committed to the deal they've struck with Adelphia and Comcast.
41:02 Deutsche Bank's Doug Mitchelson asks about slowdown in Turner ad growth -- is the cable network business as a whole a single-digit or double-digit ad growth longterm? Wayne's not concerned with the weakness in Turner Cable, he's excited about the upcoming Stephen King miniseries, as well as Closer and Saved. As for ad growth? High single-digits for the short run, and he's not giving any guidance for long-term.
43:07 William Drewry from Credit Suisse -- question too boring for words. The bottom line: they expect to move AOL customers from broadband to narrowband, and that will decrease narrowband costs.
45:02 Gordon Hodge, Thomas Weisel Partners wants to know about the trends in home video, and wants to know if they're going to buy Univision (like they're going to just answer that!). They say that Time Warner has a strong catalog in TV inventory for DVD, as well as movies, but the worldwide growth is definitely poor. Univision: "clearly a terrific company, great business targeted at an attractive demo." They don't comment in transactions. Surprised?
47:55 Kathy Styponias, Prudential, asks Dick about the $1 billion he'd planned to take out of Time Warner's cost structure. Dick says he's on plan to meet $500 million in cost reductions this year and is working on budgeting for the same deal in 2007. The cost cutting affected every division, including corporate.
50:42 Jason from Citigroup wants to know about the strategy for AOL Europe. [Chuckles from Dick and Wayne.] They've been doing well against European competition, but are evaluating its ownership structure and are looking to make it more profitable.
And with that, it sounded as if Dick couldn't push the "off" button on the conference phone fast enough. It was very abrupt. Maybe they were eager to see the market open in just a few minutes! And now, at about 1:30 p.m., the stock is down $0.30 to $17.12 on relatively normal volume, about where it's been all day. Shareholders don't seem thrilled, but no one's storming the gates.
Retailers can't wait for Black Friday, open Thursday
Tiffany's serves up solid quarterly earnings
Cramer on BloggingStocks: This bullish retail story looks like a good fit 
