Time Warner (TWX) on Wednesday posted second-quarter earnings results that were highlighted by declining sales and profits. Yet the media giant stayed on track against management's fiscal goals for the year, even as executives announced a major new bet on digital distribution of its TV content.

More on that in a moment, but first here's how the headline results compared to the prior-year period:

 Metric

Q2 2016 Actuals

Q2 2015 Actuals

Growth (YOY)

Revenue

$7 billion

$7.3 billion

(5%)

Net income

$952 million

$971 million

(2%)

Earnings per share

$1.20

$1.16

3%

YOY = year over year. Data source: Time Warner's financial filings.

What happened this quarter?

Revenue fell by 5%, marking the second quarter out of the last three in which TWX's sales slipped year over year. Growth at the Turner TV division wasn't enough to make up for a sharp decline in the Warner Bros. segment. HBO, the company's third major operating segment, posted steady results.

Image source: Getty Images.

Highlights of the quarter included:

  • Turner broadcasting, TWX's biggest unit by far, booked a 6% jump, as higher subscription and advertising sales offset a slight decline in the subscriber base. CNN enjoyed strong ratings that were boosted by coverage of the presidential race, and the NCAA basketball tournament coverage was a hit, as well. Turner's 6% ad growth edged the 5% uptick that peer Discovery (NASDAQ: DISCK) announced earlier in the week.
  • HBO managed a slight uptick as it gained subscribers, and management credited its digital platform with driving double-digit audience increases for recent seasons of Game of Thrones, Silicon Valley, and Veep.
  • The Warner Bros. segment slumped by 19%, due to the fact that hit video game releases in the prior-year period had no comparable launches this quarter.
  • Overall profitability held steady, with adjusted operating margin weighing in at 25% of sales.
  • Executives spent $700 million on stock buybacks, which powered an uptick in EPS despite lower net income.

What management had to say

"We had a strong first half of 2016, which puts us ahead of our original goals for the year," CEO Jeff Bewkes said in a press release. "Our performance reflects the creative excellence resulting from investments we've been making in the very best content." As an example of this excellence, Bewkes cited HBO's 94 prime-time Emmy nominations that kept the network on top of the industry (streaming-video specialist Netflix (NASDAQ: NFLX) is slowly closing the gap, though).

"At the same time, we're capitalizing on new distribution opportunities to take advantage of the growing demand for high-quality video content around the world," Bewkes said.

Looking forward

To that end, the company announced that it's joining forces with Disney (NYSE: DIS), Fox (NASDAQ: FOX) and Comcast (NASDAQ: CMCSA) to become a part-owner in the Hulu streaming-video service. Turner will take a 10% stake in the venture, and plans to offer its full suite of networks, including TNT, CNN, TBS, and Cartoon Network, on a live-streaming platform that Hulu sees launching in early 2017.

Notably, the service will feature live sports and news, which Netflix doesn't offer, in addition to the traditional TV series and movies that make up Hulu's current portfolio. "We're excited to join Hulu's other owners in launching a new consumer-friendly package featuring leading networks that will deliver more value to audiences and complement Hulu's core on-demand offerings," Bewkes said of the deal.

The push into digital distribution, while aggressive, isn't likely to produce sales growth in the short term. Yet it could help Time Warner offset the audience declines it's seeing in the pay-TV subscriber base, beginning in late 2017.