(Reuters) ? Comcast Corp and Time Warner Inc. reported stronger quarterly results on Wednesday, confirming that it pays to have a strong lineup of cable networks -- at least while advertisers keep spending.
Against all odds, advertisers continue to scoop up commercial time on television, and cable networks such as Time Warner's TNT or Comcast's USA have been major beneficiaries. Subscription fees have only helped.
That point was driven home on Wednesday when Time Warner reported revenue from its cable networks rose 7 percent. Comcast, whose cable business is run through its majority interest in NBC Universal, showed a 12 percent increase.
"As you know, cable networks drive the profitability of NBC Universal and they continue to perform well," said Comcast Chief Executive Brian Roberts, who has staked his reputation on last year's $30 billion deal for NBC Universal. "We are investing in programing to make them even more valuable to customers and distributors."
Comcast's cable network results stand out even more when compared to the performance of its flagship broadcast TV network NBC, whose prime-time schedule has struggled for years. Already NBC has canceled two shows it just rolled out for the new TV season, "Playboy Club" and "Free Agents."
"The cable networks like USA are firing on all cylinders. Unfortunately, the public face of NBC Universal is the broadcast network and that is just struggling," said Sanford Bernstein analyst Craig Moffett.
At Time Warner, where CEO Jeff Bewkes wants to cut costs and focus the company squarely on creating content for TV, movies and magazines, advertising sales climbed 6 percent.
It cited strong pricing at its Turner networks, home to original shows such as "The Closer," the late-night host Conan O'Brien, news on CNN and sports including baseball and auto racing.
Overall, Time Warner reported third quarter income of $822 million, or 78 cents a share, up from $522 million, or 46 cents a share, in the same period a year ago. Adjusted earnings rose a better-than-expected 27 percent to 79 cents a share.
Along with its cable business, the company got a big lift from the latest installment of the Harry Potter movie series. Its stock slipped 1 percent to $33.48, however, on what analysts described as concerns about future growth prospects.
ADVERTISING SURPRISE
It is not just Comcast and Time Warner whose results are enjoying the one-two punch of cable advertising and cable subscription fees. Discovery Communications Inc, the company behind hit cable TV shows such as "Storm Chasers" and "Deadliest Catch," reported quarterly results late Tuesday that surpassed Wall Street expectations.
Next up is News Corp, whose cable networks should emerge from the large shadow cast by its troubled newspaper arm when it reports earnings later on Wednesday. Walt Disney Co., with some of the best cable brands in the business, including ESPN, reports next week.
To many observers, the continued strength of national advertising comes as a surprise. Just two years ago, in reaction to the recession, overall U.S. ad spending dropped by percent to $163 billion.
Today's stubbornly bad jobs and housing markets -- couple with Europe's debt crisis -- would seem the sort of troubles that would have advertisers once more slashing budgets.
Advertisers instead appear to be betting that the best way to jump-start sales is to keep their brands in front of consumers with billboards, digital campaigns and, particularly, TV commercials.
Heading into Wednesday, the economy was a major question facing media companies, particularly Comcast. Not only does Comcast rely on advertising from its TV networks, its chief business of selling broadband, video and telephone services relies heavily on the housing market and consumer confidence.
Overall, it added 229,000 telephone, video and Internet customers. That satisfied Wall Street and calmed worries that arose last week when Time Warner Cable and Cablevision Systems Corp, two rivals, posted disappointing subscriber numbers.
Comcast reported third-quarter net income of $908 million, or 33 cents a share, up from $867 million, or 31 cents a share, in the period a year ago.
Shares of Comcast rose 2.2 percent to $23.50.
(Additional reporting by Jim Finkle in New York; Editing by Derek Caney)
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