Roger Yu

USA TODAY

Time Warner, the media giant that owns HBO, CNN and Warner Bros., said Wednesday it bought a 10% stake in Hulu to broaden its video streaming distribution, following a dip in second quarter net income stemming from declining television licensing revenue and home video sales.

Its partnership with Hulu, a video company that competes with Netflix, calls for Time Warner's "full suite of networks to be carried on Hulu’s live-streaming service" that will be launched next year, Time Warner CEO Jeff Bewkes said in a statement.

Time Warner networks that will be streamed live on Hulu will include TNT, TBS, CNN, Cartoon Network, Adult Swim, truTV, Boomerang and Turner Classic Movies. The deal doesn't include HBO's programming, which is streamed on HBO Now, a service for customers who seek the popular premium channel without subscribing to cable.

Shares of TWX closed 2.7% higher, to $77.83.

Time Warner paid $583 million for the stake, Bewkes said in a conference call with analysts.

Netflix shares fall on Time Warner/Hulu report

Time Warner also raised its earnings guidance for the year. Its 2016 per-share earnings, excluding some items, are now expected to be in the range of $5.35 to $5.45.

Its second quarter net income totaled $952 million, do wn 2% from a year ago. On an adjusted basis, earnings per share were $1.29, topping the $1.16 predicted by analysts who were polled by S&P Global Capital Intelligence.

Total revenue fell 5% to $7 billion.

“We had a strong first half of 2016, which puts us ahead of our original goals for the year,” Bewkes said. “We’re capitalizing on new distribution opportunities to take advantage of the growing demand for high-quality video content around the world.”

Hulu, which is jointly owned by the Walt Disney Co., 21st Century Fox and Comcast, currently carries some of Time Warner's content. But the investment deepens their relationship at a time when Time Warner is facing a seemingly irreversible decline in cable TV customers and increasingly tussling with pay-TV operators about digital distribution rights. The Hulu alliance also could come in handy -- or perhaps even complicate -- Time Warner's own strategy of streaming shows on HBO Now.

The sluggish performance turned in by its Warner Bros. unit in the second quarter was largely to blame for the overall revenue fall and reflected the company's need for a more consistent source of content licensing revenue. The film-and-TV production studio generated $2.7 billion in revenue, down 19%, as sales of video games and home movies fell. Television licensing revenue also was lower than a year ago, when it sold the second-cycle syndication of The Big Bang Theory and the subscription video-on-demand licensing of Seinfeld.

Revenue at Turner, its largest business unit that operates CNN, TNT, TBS and other cable networks, rose 6% to $3 billion. Subscription revenue, paid by cable and satellite TV companies, climbed 11%. Higher rates at Turner’s international operations helped drive subscription revenue higher. But the number of domestic subscribers fell as TV fans continue to ditch their cable and satellite TV accounts for online streaming options.

With all things Donald Trump blaring constantly on CNN, Turner’s advertising sales rose 6%. Time Warner attributed the growth primarily to the news business and college basketball.

HBO's revenue rose 2% to $1.5 billion, reflecting its enduring popularity among TV fans. Subscription revenue increased 6% due to a gain in subscribers and higher domestic rates it charged to pay-TV operators. But HBO's content and other revenue was down 14% as domestic licensing revenue fell.

Follow USA TODAY media reporter Roger Yu on Twitter @ByRogerYu.