TV costs hurt Time Warner

Turner Broadcasting’s long-term deal with the NBA and rapid international expansion of CNN curtailed operating income at Time Warner’s networks last year, according to financial statements released Wednesday by Time Warner.

Cost reductions are planned, but officials would not say whether job cuts are possible at Atlanta-based Turner.

Network programming expenses, including the ones for NBA TV as well as the original and licensed shows that run on Atlanta-based Turner’s networks such as TBS, TNT and Peachtree TV, increased 8 percent in 2008 to $3.9 billion.

The higher costs to produce and run such shows dragged on Turner’s adjusted operating income, which climbed a slight 4 percent to $3.5 billion, Time Warner said in documents filed with the Securities and Exchange Commission.

The expense and income figures represent the Turner networks and HBO.

Turner signed an eight-year deal with the NBA last year that allows its Turner Sports division and NBA Digital unit to handle the production, advertising sales and marketing for about 50 league and team Web sites.

Meanwhile, CNN added international bureaus and reporters to bring more original news and content to its cable news networks as well as CNN.com. It also spent more to cover the 2008 election.

“From an accounting recognition of sports programming rights, we expect in 2009 to recognize considerably less cost relative to what we recognize [in 2008] because there was a new contract involved this year,” Time Warner’s chief financial officer, John Martin, said during a conference call with investors.

“To offset the programming cost increases, the Turner management team … is in the process of putting through a number of cost reduction initiatives to try and manage that and offset that.”

Time Warner reported a $16.03 billion fourth-quarter loss, compared with a profit of $1.03 billion a year ago. The media and entertainment company was hurt by an expected $24.2 billion write-down for its cable, publishing and AOL assets.

Separately, Time Warner Cable Inc. reported a massive loss for the quarter, ending Dec. 31, after taking a $14.8 billion noncash charge. It plans to lay off 1,250 workers over the next few weeks in the face of slowing growth at the nation’s second largest cable operator.

As expected, Time Warner took a $280 million charge related to the multimillion-dollar verdict from Turner’s breach-of-contract case over selling the Hawks and Thrashers in 2003. The company said earlier this month it planned to set aside money in case a judge fails to reverse the verdict.

A Fulton County Superior Court jury unanimously ruled in December that Turner owed David McDavid money for a breach of contract when it sold the Hawks, Thrashers and Philips Arena operating rights to another bidder. The Texas businessman sought to buy the teams in 2003 but lost out to an eight-man investor group known as the Atlanta Spirit.

The Associated Press contributed to this story.

FOURTH-QUARTER HIGHLIGHTS

> A $16 billion loss

> Layoff of 1,250 workers at Time Warner Cable

> Cost cuts at Turner Broadcasting

> $280 million charge related to the McDavid lawsuit over the Hawks, Thrashers and Philips Arena operating rights.

Source: Time Warner fourth-quarter report to SEC