Warner Bros Entertainment Australia posted a 51 per cent decline in net operating profit last year to $10.26 million, according to documents filed with the corporate regulator.

The company, which is the head of the US studio’s operations in Australia, includes five divisions: theatrical, television distribution, home entertainment distribution, consumer product licensing, and feature productions.

While revenue from continuing operations increased 21.5 per cent to $537.25 million in the year ended December 31, 2011, expenses also rose substantially. Advertising and promotion costs rose 28.2 per cent to $47.42 million while other expenses from continuing operations climbed 54.3 per cent to $460.16 million. The largest component of that rise was the cost of “royalties”, which rose from $119.24 million to $261.98 million.

However, Warner Bros Entertainment Australia is not a reporting entity under the Australian Accounting Standards and financial reports filed with the Australian Securities and Investments Commission do not always paint a full picture of operations. A spokesperson for Warner Bros said it had a policy to not comment on financial results.

In the notes to the financial report, the directors said the theatrical division had “great success in 2011 driven by four major releases”: Inception, Harry Potter & The Deathly Hallows: Part 2, The Hangover Part II and Yogi Bear. The division released 17 films in 2011 (compared to 12 in 2010) which bolstered revenue by 12.75 per cent.

The company said its television division “achieved further strong results in 2011” via its long-standing licensing arrangements with free-to-air partner Nine Network and pay-TV provider Foxtel, as well as on new media platforms, such as a Warner-branded subscription video-on-demand service through Quickflix. It also said The Movie Network Channels (TMNC), in which it holds a 25 per cent stake, sustained its position as a leading subscription TV offer on the Foxtel and Austar platforms.

“Although pay-TV growth is slowing in line with the Australian domestic consumer slowdown, TMNC continues to perform to expectations,” the report said.

The Warner Home Entertainment Division had a “hugely successful 2011” driven by a strong theatrical new release slate, while the blu-ray format again showed significant growth in 2011. Games revenue increased due to the strong performance of Batman Arkham City and Lego Harry Potter 2 while the digital business also continued its growth. Meanwhile, the consumer products division also increased revenue.

Warner is overseeing production of Baz Luhrmann’s The Great Gatsby and the long-delayed Mad Max film, Fury Road.

During the year, it received a PDV (post, digital and visual effects) tax offset for Harry Potter and the Deathly Hallows: Part I and Sucker Punch. Australian PDV work for Harry Potter and the Deathly Hallows: Part II, Green Lantern, Journey 2: The Mysterious Island and The Lucky One was also completed in 2011.

Contact this reporter at bswift@www.if.com.au or on Twitter at @bcswift.

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