August 3, 2016 / 11:24 AM / 4 years ago

Time Warner takes stake in Hulu, lifts profit forecast

(Reuters) - Time Warner Inc TWX.N disclosed a 10 percent stake in video streaming site Hulu on Wednesday, setting its sights on the web TV market, and it raised its 2016 forecast on expectations of sustained growth in its traditional media business.

Time Warner also reported a higher-than-expected quarterly profit as it signed up more viewers to its premium Home Box Office network. Its shares were up 3.5 percent at $78.40 in afternoon trading.

The company, which also owns the Warner Bros movie studio, is paying $583 million for the Hulu stake, executives said on a conference call. Other Hulu owners are Comcast Corp (CMCSA.O), Walt Disney Co (DIS.N) and Twenty-First Century Fox Inc (FOXA.O).

Time Warner has been trying to woo younger viewers and push into the online video market dominated by services such as Netflix Inc (NFLX.O) and Amazon Prime (AMZN.O). Last year it introduced its own streaming service, “HBO Now,” and made its content accessible on Dish Network Corp’s (DISH.O) Sling TV streaming service, which offers a small bundle of channels.

“They want to ensure that the Turner networks have the broadest possible distribution without really compromising the traditional cable, satellite and telco channels,” said Wunderlich Securities analyst Matthew Harrigan.

The investment also gives Hulu additional funding as it prepares to roll out a new live-streaming service, which is slated for early next year. Turner’s networks, including TBS, Cartoon Network and Turner Classic Movies, will be available live and on-demand on Hulu’s new service, Time Warner Inc said on Wednesday.

The company raised its 2016 earnings forecast by 5 cents a share to a range of $5.35 to $5.45. Analysts on average were expecting $5.39, according to Thomson Reuters I/B/E/S.

Second-quarter revenue fell 5.3 percent to $6.95 billion from $7.35 billion, mainly due to a decline for the Warner Bros studio.

A woman walks past the Time Warner Center near Columbus Circle in Manhattan, New York July 16, 2014. REUTERS/Adrees Latif

Revenue from the Turner division rose 6.5 percent during the quarter. Revenue at HBO, which hosts the hit show “Game of Thrones,” was up 2 percent.

Time Warner’s net income fell to $951 million, or $1.20 per share, from $971 million, or $1.16 per share, a year earlier.

Excluding special items, earnings of $1.29 per share beat the analysts’ average estimate of $1.16.

Additional reporting by Supantha Mukherjee in Bengaluru; Editing by Lisa VOn Ahn

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