Entertainment conglomerate Time Warner (NYSE:TWX) hit on an old way to scare viewers while filling its coffers. Texas Chainsaw Massacre, a $9.5 million remake of a 1974 movie, took in $29.1 million in its first three days. Sounds like another great year for Warner Brothers and New Line Cinema.

Most studios would kill to have Time Warner's multi-year win streak. At Warner Brothers, the Harry Potter and Matrix franchises are producing mega-results. The same goes for New Line and their Lord of the Rings.

With $1.6 billion in international receipts, Warner Brothers led all studios last year. In July this year, the company crossed the $1 billion international sales mark earlier than ever before -- and for the sixth time.

Franchise movies can be extremely profitable. The Matrix Reloaded, a May 2003 release with an estimated budget of $127 million, grossed $281 million domestically and $727 million worldwide. Even better for shareholders, The Matrix: Revolutions will be released in November.

This is going to be a great year for Time Warner's movie divisions. So will 2004. A November release for Matrix: Revolutions and December's Lord of the Rings: The Return of the Kings means revenues will spill over into 2004 along with Harry Potter and the Prisoner of Azkaban. That trio is as close to a sure thing as any studio has ever had.

People wanting to find fault with Time Warner will note the last movie in the Lord of the Rings trilogy will be released in 2003. That is a big loss. But the revenue from that movie will continue through 2005 with releases to rental, cable, and TV. Movies are increasingly a business with a long revenue cycle.

The studio divisions are obvious strong spots at Time Warner. But the overall company is stronger than you'd think given a stock that plunged from $95.81 in December 1999 to $9.90 in February 2003. Free cash flow of $3.9 billion is impressive, and even a debt-to-equity ratio of 0.46 is less than Disney's (NYSE:DIS) 0.55. Funny, Disney doesn't generate the "debt's too high" stories like Time Warner.

Time Warner has a strong engine in movies and a lot of other world-class assets. If nothing else, its upside potential, especially after all the restructuring, is getting harder and harder to deny. That was something David Gardner recognized when he recommended the stock for Motley Fool Stock Advisor in August of 2002.

W.D. Crotty owns stock in Disney. He can be reached at HawaiiFool@hawaii.com .