Date shake on menu for TW's DVD, VOD

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ime Warner CEO Jeffrey Bewkes is looking to charge ahead of the Hollywood pack with day-and-date VOD film releases.

Bewkes said Wednesday that his company this year will make available all its DVD film titles on VOD on a day-and-date basis. With TW leading the charge among studios, the company expects to "capture a disproportionate VOD share," he said during the conglomerate's first-quarter earnings call.

The decision comes after trials last year with Comcast and Time Warner Cable, which Bewkes — who has been the industry's biggest champion of the day-and-date model — said proved the positive business effects of this release strategy.

For one, DVD sell-through was up in the trials, he said. Also, margins from day-and-date VOD run at 60%-70%, compared with 20%-30% for physical DVD rentals, Bewkes added. "It's very good for the film companies," he said.

After public comments last year, industry executives have been tight-lipped about day-and-date VOD of late. News Corp. president and COO Peter Chernin said last year that his company's trials with cable operators had not yet conclusively proved to work financially.

After Bewkes' announcement Wednesday, it is now up to TW's film unit and cable operators to work out specific day-and-date deal arrangements before consumers will get to enjoy the benefits. The timing of the first full launches is unclear for now, but Comcast and TWC are seen as the lead contenders to sign on. The two cable firms along with Cablevision Systems and Charter Communications had no immediate comment on the Bewkes push.

Since he took over the CEO role in January, Bewkes and his team have moved aggressively to change the way certain parts of the way key businesses work.

Another such change is the scheduling of the upfront presentation for the firm's Turner cable networks during the week of the broadcast networks upfront.

"This is not a coincidence," Bewkes said. "Turner is better positioned than ever to challenge the broadcast networks." He argued that ad buyers and others are increasingly realizing this, and he expects this to be reflected in this year's upfront. The Turner networks saw advertising revenue rise 13% in the first quarter, with scatter market prices in that quarter and the current one up by double-digit percentages compared with last year's upfront.

TW also is moving ahead with expected restructurings of key units, particularly a complete separation of Time Warner Cable. The remaining content businesses will grow solidly, and management Wednesday defended itself against suggestions of anemic growth. CFO John Martin highlighted that the core content units grew operating cash flow 10% in the first quarter when excluding one-time items.

Bewkes said the conglomerate has formally decided that a complete separation of TWC is in the best interest for both companies, even though TWC's business remains strong. TW and TWC did not provide specifics on the likely structure of a separation Wednesday, disappointing some on Wall Street.

Bewkes said the parties are "close" to agreeing on final terms, making a detailed announcement likely to happen "very soon." Analysts expect there could be a one-time dividend payout tied to the separation of TWC.

Meanwhile, TW also is continuing to work on separating the access and ad businesses of AOL, which is expected to happen this quarter.

Bewkes recently restructured New Line and moved it under the Warner Bros. umbrella. The related layoffs and changes led to a $116 million charge in the first quarter, with $20 million-$30 million still to come. Bewkes said the lowered costs and increased revenue from retaining international film rights will ensure that annual financial benefits outweigh the charges.

TW reported a first-quarter profit of $771 million, down 36% year-over-year. Revenue rose 2% to $11.4 billion on growth at TWC and the film and TV networks units.

The figures were roughly in line with Wall Street expectations. (partialdiff)
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