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Cable television broadcasting industry

Time Warner Slashes Forecasts, Takes $25bn Writedown on Old and New Media

Strategic Insights

— 1 min read

The global media sector continues to struggle with Time Warner announcing a major write-down on its old and new media assets, including a $25bn hit on the value of its magazines and Internet brands. The company, which owns Time Inc, Warner Bros, and CNN, has revised its 2008 profit forecast to just 1% growth, down from an expected 5% as recently as November. The writedown is attributed largely to a decline in the value of its cable operator franchise rights, triggered by a fall in the company's stock price.

Key Takeaways:

  • Time Warner has taken a $25bn writedown on its old and new media assets, including AOL, Time Inc magazines, and Warner Bros.
  • The company has revised its 2008 profit forecast to just 1% growth, down from an expected 5% as recently as November.
  • The writedown is attributed largely to a decline in the value of its cable operator franchise rights, triggered by a fall in the company's stock price.
  • Time Warner Cable has stated that the charges were related to a court ruling over the sale of its sports teams, the bankruptcy of Lehman Brothers, and other exposures to recently bankrupted customers.
  • The company continues to expect full-year 2008 free cash flow of $5.5bn.
  • Time Warner is considering various options to improve AOL or merge it with a rival, including ongoing discussions with Yahoo.
  • Analysts are reevaluating their numbers for AOL and Time Inc, with Barclays Capital's Anthony Di Clemente stating that the trends for 2008 are being rolled into 2009.

Statistics:

  • Time Warner's writedown on old and new media assets: $25bn
  • Decline in adjusted operating income before depreciation and amortisation: 180 basis points
  • Revisions to 2008 profit forecast: Down to 1% growth from 5% expected as recently as November
  • Time Warner's free cash flow for 2008: $5.5bn
  • Percentage decline in value of Time Warner's cable operator franchise rights: Not specified in the article

Sources:

  • "Time Warner to Take $25bn Charge: Write-downs on Old and New Media," The Lex column, Financial Times (no date)
  • Anthony Di Clemente, Barclays Capital, comments
  • Time Warner, press release (no date)

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