TV Profits Pinched by Content Costs

Earnings at Time Warner and Comcast highlight the challenges facing traditional television networks grappling with rising programming costs and intensifying online competition.

Both companies reported slightly lower first-quarter earnings from their cable-channel businesses as higher advertising revenues were offset by increased programming expenses, among other factors. And Comcast's broadcast-TV unit, which includes the NBC network, swung to a small loss before depreciation and amortization charges, even though its broadcast of the Super Bowl sent ad revenue sharply higher. Comcast blamed higher programming and marketing costs. Overall TV viewing has weakened in recent months as online viewing has soared. The years-old strategy of relying on reruns for earnings also is losing traction for cable channels as many reruns are now available online through services like Netflix. As a result, cable channels are investing more in new programming to lure viewers. That's hurting profits. Time Warner, which owns such channels as HBO, TNT and CNN, said its TV networks' operating profit fell 1.6%. While revenue rose 3% from higher subscription and ad sales, programming costs rose 6%, primarily because of pricier original programming and sports-broadcast rights.