Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Insanity

Is Time Warner Making Money?

It was not a very good holiday season for Time Warner (NYSE: TWX). The company’s big-budget superhero team movie Justice League bombed at the box office, and archrival Disney (NYSE: DIS) gobbled up 21st Century Fox (NYSE: FOXA) another rival.

Justice League made just $654.4 million at the box office, less than Disney’s junk board game movie Jumanji: Welcome to the Jungle, reported. Jumjani achieved a worldwide box office gross of $666.17 million.

This is bad; Time Warner cannot monetize one of the biggest superhero franchises in the universe, while Disney can make money off of junk-pop culture properties. To add the nightmare, owning Fox would give Disney many more properties to exploit; including X-Men, Buffy the Vampire Slayer, Deadpool, The Simpsons, and Planet of the Apes.

Why Can’t Time Warner get Superheroes Right?

Likewise, Disney has been able to exploit junk Marvel superheroes like Ant-Man while Time Warner has messed up both Batman and Superman.

Time Warner had a great superhero franchise in Christopher Nolan’s Batman, they dumped it for Matt Damon’s boring rendition of the character. Time Warner has another such franchise in the form of Wonder Woman but they’ll probably wreck it too.

The Super Friends look familiar all the movie needed was Wendy, Robin, Wonder Dog, and Marvin.

One reason why Time Warner fails is that nobody at the company seems to understand the comic book material. Take the Justice League movie the team consisted of Cyborg (a Teen Titan), and Superman, Wonder Woman, Batman, and Aquaman. That’s not the Justice League, it is the Super Friends a lame 1970s Saturday morning cartoon. Or the Super Power Powers Team, an even lamer 1980s cartoon.

Another is that Time Warner has not figured out the Marvel movie formula, find competent but proven independent directors and put talented character actors in the costumes. Keep egotistical movie stars and high-concept big time scriptwriters away.

This is not exactly rocket science it worked three times with Time Warner’s own Batman franchise. Nolan hired an unknown Brit named Christian Bale, to play Batman, and tapped reliable character actors to fill the other parts. He also hired veteran comic writer David Goyer to script The Dark Knight Rises.

A similar formula works for the various DC-comics shows on the CW Network, such as Arrow, Supergirl, and The Flash. One reason for that is CW is too humble a venue for the egomaniacs in the Hollywood elite to notice. One has to wonder, why Time Warner didn’t stick the successful TV versions of Supergirl, the Green Arrow, the Black Canary, or the Flash into its Justice League movie. Another lesson from Marvel is that when something works; run with it, just look how long that studio has been milking Robert Downey Jr.’s Iron Man.

This failure to cash in on historic pop culture properties should worry Time Warner investors because the company is about to be faced with a deluge of new superhero and other movies from the Magic Kingdom. Disney now has all the material in 20th Century Fox’s vaults to mine for new movies, in addition to its own vast storehouse of underused characters.

The Super Powers Team

Can Time Warner Make Money?

Strangely enough, investors may not have much to worry about because even an inept company like Time Warner seems to be able to mine pop culture for profit.

Time Warner made $7.595 billion in revenue during 3rd Quarter 2017, Stockrow data indicates. More importantly that revenue grew by 5.97% during the quarter.

The company made a gross profit of $3.667 billion and an operating income of $2.245 billion off that revenue. Those numbers gave Time Warner $1.372 billion in net income and $1.992 billion in earnings before tax for the quarter.

That makes Time Warner a sort of entertainment value investment because it can money even off clunker superhero projects like the dismal Batman and Superman films of recent years. It also achieved a free cash flow of $1.334 billion and an operating cash flow of $1.494 billion off those revenues.

The company even accumulated some float in the form of $2.621 billion and assets of $68.343 billion at the end of 3rd quarter. Still one wonders how Time Warner can match a behemoth like Disney which reported $95.789 billion in assets and generated revenues of $12.779 million during 3rd quarter 2017.

One of many versions of the real Justice League

Can Time Warner Make Money?

By comparison with Disney, Time Warner was overvalued at the $92.53 a share it was trading at on 18 January 2018. Disney was trading at $110.41 a share on the same day but it reported annual revenues of $55.14 billion on January 18, 2018.

Despite that, Time Warner is a pretty good dividend stock. It paid a decent dividend of 40.3¢ a share on January 9, 2018. That dividend is pretty steadily, the 40.3¢ has been paid out every quarter since February 2016.

This means Time Warner will make money but it faces some serious problems. The biggest of which would be Disney buying Netflix (NASDAQ: NFLX). Disney’s resources plus Netflix would doom competitors. Since Netflix cannot seem to make money this scenario is more likely than you think.

The Arrow’s crew is closer to the real Justice League than the gang in the movie.

Investors should stay away from Time Warner until its price drops below $70. This stock is a potential value because of Time Warner’s assets; particularly all the Hanna Barbara cartoons and DC Comics characters, but it is overpriced right now.

Disclaimer: This commentary is intended as food for thought – not as financial or investment advice!! Please folks do your own research and thinking and make up your minds.