Time Warner's Jeff Bewkes Calls Netflix Offer 'Measly'

11:52 AM PST 12/06/2010 by Georg Szalai

The CEO says money offered by Web aggregators for recent TV shows is "measly" and HBO could get unbundled from current cable packages.

NEW YORK -- Time Warner chairman and CEO Jeff Bewkes predicted Monday that entertainment companies will in the future limit program deals with such low-priced online aggregators as Netflix to content that has pretty much run its course in previous release cycles, such as in syndication and on DVD, rather than current content.

Doing so will allow content firms to fully monetize the value of their productions that can often still make millions in other release windows when they already are available online, he suggested.

"Some of the things you see in place now will not remain," he said in a lunch time keynote interview at the 38th annual UBS Global Media and Communications Conference with Aryeh Bourkoff, joint global head of Technology, Media and Telecoms (TMT) banking at UBS.

Asked about a recent report that Netflix is looking to pay as much as $70,000-$100,000 per in-season episode of TV shows for streaming purposes, Bewkes said: "If you took your example [of price], which is a measly little offer...that is not attractive or incremental" given that content companies can get millions and millions in the various syndication cycles and on DVD. "Large aggregation at a low price is not particularly useful" to content creators and consumers alike, Bewkes argued.

To make Netflix bids competitive, the company would have to not only make offers for the streaming rights portion, but the broader set of content rights, Bewkes suggested.

"I don't think it makes sense" for content firms to pay big money to produce high-quality TV series and for networks to pay high price tags for them only to have them show up on a low-priced Web service, which pays only a fraction, he offered.

Netflix and other online services that cost $8-$10 per subscriber a month are naturally a better place for content that doesn't have further monetizable use in other places, he said. "It should be things that don't have further monetization or higher monetization" in other release windows, he said.

TW's Warner Bros. this summer licensed a package of TV shows, such as Pushing Daisies and Veronica Mars, to Netflix that it felt don't have more upside in other windows.

Bewkes has been more outspoken than others in the entertainment industry about how Netflix is both a potential partner and a potential threat to business models.

Don't worry about HBO, Bewkes also told investors when asked about the premium TV service.

HBO's paying subscriber figures have been pretty much unchanged in the recession, and revenue is higher due to its pricing power. Solely promotional sub figures are set to decline this year, he said, referring to a recent prediction that HBO will lose about 1.5 million subs this year, mostly promotional ones.

Bewkes also suggested HBO could in the future be offered to consumers outside traditional cable and satellite TV packages -- via traditional or new distributors. He signalled that could make sense if subscriber growth one day is "overly hindered" by consumers' need to pay for a pricey pay TV service for $60-$100, for example, with HBO on top. He didn't provide further details on how such an offer could work and when he may start considering it, but his suggestion comes amid recent subscriber losses for TV distributors and related concerns about cord cutting.

Bewkes has previously signalled he may look at new approaches. HBO has been rolling out HBO Go, a broadband offer for people who already subscribe to the premium TV service via their cable, satellite or telecom provider. The TW CEO has hinted that the broadband service could one day be marketed directly to consumers.

Asked about TW's recent stock underperformance, Bewkes quipped: "Thanks for pointing that out."

Calling the stock performance "a little frustrating" given the company's "stable operating performance" and investor-friendly moves, Bewkes argued that business model fear in the digital age "is causing a lot of, in my view, under-valuation."

He then reiterated his previously stated belief that digital is "more an opportunity than a threat."

Bewkes predicted that beyond Google TV, Microsoft, Facebook and other technology players will also look to bring content to consumers together with programmers in new interfaces.

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