Time Warner (TWX) CEO Jeff Bewkes Interview

Time Warner (TWX) CEO Jeff Bewkes on what he views is the biggest threat to paid TV right now

“There’s a question of whether programming is being devalued. What is the economic sustainability of something that uses a lot of bandwidth and doesn’t pay for it and that runs a lot of expensive programming and essentially doesn’t have a profit? Think of Amazon or Netflix. The usual reason companies are funded or valued on the stock market for not having a current profit is because the investors believe there will be a future profit. That means they believe the market leadership position is going to turn into something that is unassailable enough—in other words, that does not have enough effective competition—that it can either cut costs or drive revenue and make a profit.”

Time Warner (TWX) CEO Jeff Bewkes on how he views Netflix competing with HBO

“I think the question is: How has the strategy of HBO created the strategy of Netflix? HBO is the original subscription video-on-demand company. We were repurposing first-run movies, and then we added original programming. We had a colleague in the industry, [Netflix Chief Executive Officer] Reed Hastings, who decided to do the same thing and put it over broadband. Since they’re on broadband, they can do it according to net neutrality without paying for the usage. And because broadband allows for two-way interactivity, you can get data on what people are watching and start a conversation. If you watched this, you might like that. That’s a great innovation. That’s exactly the kind of thing where you could take not just Netflix but all of Silicon Valley and harness those abilities to do global, at scale, distribution. That’s a tremendous boon to an industry producing more and more programming. If you don’t have a way to search and have recommendations based on other things you’ve watched, you couldn’t figure out what the hell to look at, because there’s too much! I think it’s going to reinvigorate the television industry.”

On what the cable-TV bundle will look like in 10 years

“There will still be the cable bundle we know now, which is the full monty with hundreds of channels, live news, sports, niche, etc. You’ll see for that big bundle and for the more focused bundles—whether it’s what interests you have or what price point you want to pay—you’re going to see the core channels represented across all of them, and you’re going to see full video on-demand and very good search recommendation and navigation engines, so consumers know what the programming is and where to find it.”

On the escalating costs of sports programming

“The cost of sports rights will continue to increase. The question is whether they increase at the same rate. They were increasing 15 to 20 percent in the last eight or nine years. Football has been the mainstay. That’s where a lot of the money is, and it mostly goes to the four big broadcast networks. The one that’s growing fastest globally and in the U.S. and in the young demographic is basketball, which is why we picked the championship pieces of the NBA and NCAA. Those were serious investments, but our affiliate revenue growth in relation to those sports costs is very positive, so it’s an increasing margin.”

On whether he would sell the company 

“It’s not up to me. The obligation of every ethical management is to make sure we optimize the long-term value of the company. We’re growing the company. We’ve grown the company at 25 percent a year in earnings for the last eight years. That’s a lot higher growth than the S&P. We’re essentially outperforming every other media company with the exception of CBS. When people talk about potential suitors showing up, that’s because there’s not a Sumner Redstone or Rupert Murdoch or [Comcast CEO] Brian Roberts who own the blocking shares. That’s why they talk about it. It’s not because there’s a performance issue. If somebody offers something to our shareholders that’s better than our earnings track, obviously we would try to consider what’s best for our shareholders. We’re a pretty big company. It’s expensive. I don’t anticipate being interrupted.”




Source: Bloomberg Interview http://www.bloomberg.com/news/articles/2016-08-02/jeff-bewkes-thinks-cable-s-future-is-fine