Time Warner seeks digital growth in 2007

By Kenneth Li

NEW YORK (Reuters) - Time Warner Inc.'s (TWX.N: Quote, Profile, Research, Stock Buzz) digital businesses will see improvements in 2007, buoyed by new developments at its films division and a faster-than-expected transition to an advertising-supported business at its AOL Internet unit, CEO Richard Parsons said on Tuesday.

Speaking at the third annual Reuters Media Summit, Parsons, head of the world's largest media company, said Warner Bros. planned to make some movies available to viewers over the Internet that can be transferred, or burned, onto DVDs.

AOL's restructuring during the summer, to begin offering most of its services for free to boost online ads, was also improving beyond the division's own expectations, he said.

"Traditional media businesses are finding their way into the digital space without completely capsizing or cannibalizing their traditional media businesses," Parsons, chairman and chief executive, said. "The marketplace's view of Time Warner is improving and I think it will continue to improve in 2007."

The plans come amid a media industry-wide march to seek new customers, who now split their leisure time watching television, surfing the Web and playing games on cellphones.

Media conglomerate stocks as a group have risen 17 percent this year, outpacing the S&P 500's 12 percent rise, on investor belief that big media was on a path to profit from and not be destroyed by the Internet.

Time Warner shares have risen about 16 percent this year, compared to a 32 percent rise in News Corp.

For Time Warner, whose stock has suffered through most of its time after the 2001 purchase of Time Warner by AOL, Parsons sees technology as a big catalyst for change throughout the company's portfolio of film, magazines, and television assets.

Top priorities for next year include completing an anticipated spin-off of some 16 percent of Time Warner's cable services division and improving more of its magazines's Internet strategies, Parsons said.

VIDEOS TO GO

Some time next year, Time Warner's film division plans to offer to make its movies available to viewers to download over the Internet for transfer to DVDs.

The company is considering making movies available for such services a few weeks after or even on the same day DVD versions go on sale, Parsons said

World's largest retailer Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research, Stock Buzz) on Tuesday said it plans a test of its new video download service starting on Wednesday. It will offer consumers who buy the physical DVD of Warner Bros.'s "Superman Returns" the option to download the movie for an additional fee.

"I expect we will be in a download-to-burn mode in 2007 -- It will be a part of next year's offerings," Parsons said.

Time Warner is testing a service to sell movies digitally at kiosks at Wal-Mart as well, Parsons said.  Continued...