Time Warner CEO: 'Nobody' Will Pay for Aereo Service

2012-43 REP Jeff Bewkes P

Time Warner's chairman and CEO scores a new five-year deal that could earn him an additional $30 million in stock bonuses if the company thrives.

Jeff Bewkes also answers latest questions about the competition from Netflix after the streaming video service passed HBO in its U.S. subscriber count.

LONDON - Aereo doesn't have a compelling value proposition for consumers, Time Warner chairman and CEO Jeff Bewkes said here on Thursday. Appearing at a media and entertainment conference, he also one again shrugged off concerns about the challenge that online video streaming service Netflix poses to his company's HBO.

Speaking on a panel at the Financial Times Digital Media Conference, Bewkes said subscription TV businesses continue to do well and see more upside in the digital age. He also said that his company continues to grow the financials of its TV business at a time when all the best content is developed for TV.

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Reporting its first-quarter earnings earlier this week, Netflix said it had reached 29.2 million U.S. subscribers as of the end of March. That compares with 28.7 million at HBO.

Bewkes highlighted that the bigger a subscription business gets, the more growth momentum tends to slow down. "Every time you add subs, your disconnects grow," he said. "Once you get into the 20 millions, it is very hard to go as fast as before...maybe it will get to 40 million. HBO is at 110 million worldwide."

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He also discussed Netflix's development: "It actually went the way we thought," he said. "It's essentially giving you a great library service with a great interface" and a focus on serialized drama. "Netflix is a pretty good company. It is not at all surprising that they have the subscriber count they have."

Asked about Netflix's original programming push, Bewkes said it seems to be doing well with originals so far. But he highlighted that the company has a programming budget that is much less than HBO's when multiplying an $8-$9 subscriber fee per month by the close to 30 million subscribers. HBO can also convert its big program investment and content into higher subscription rates, Bewkes argued.

He also highlighted that Netflix is "just another entry" into original programming, with such networks as AMC, Showtime and many others having enjoyed success here as well. "I think there will be more," Bewkes said. "That's fine."

Asked about Barry Diller-supported digital broadcast TV provider Aereo, which has been locked in a legal battle with broadcasters, Bewkes shared his thoughts, even though Time Warner focuses on cable networks. "Nobody's going to buy it," he said. "I don't think they have much of a proposition." Aereo hasn't disclosed how many subscribers it has.

Explained Bewkes: "If law allows it, which I don't think they will, they will offer [three to four] free-to-air channels. They are free already. All they are doing is charging [people] $8 per month to get them on-demand." Also, broadcast networks' share of total TV viewership has declined over the years, he also highlighted.

Some industry executives, including News Corp. president Chase Carey, have recently said they may consider moving their broadcast TV signals to cable if the courts end up allowing Aereo to continue to operate.

Bewkes spent most of his time Thursday describing the TV industry as going through another golden age right now.

"The people of the world love television," he said. "The amount and quality of television production is taking off. All the best stuff is made for television now."

Bewkes said that the increased engagement with TV content by making it available on demand "makes it more valuable." And he said that TV is taking over the Internet rather than vice versa with more people accessing TV content online. Once the industry gets to the point where all TV shows and networks are available on demand online and on pay TV services, "that is a huge change," he said.

Bewkes answered a question about the importance of digital by saying the key trend was really a different one in TV. "You can call it digital. I don't. It's video on demand," he said. "That's the revolution that's happening now...What are Netflix and YouTube? They are VOD platforms." He also said that with TV content increasingly moving across new platforms, "there is no distinction between television and digital media. All TV you are watching is digital media."

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Thomas Rabe, the chairman and CEO of German media giant Bertelsmann who sat on Thursday's panel here with Bewkes, said that European TV giant RTL Group, in which his company has a big stake, also "has many digital opportunities."

He said: "Television viewing is growing in virtually all European markets...ad share of TV has increased. And we believe there is room for more, especially in countries like Germany."

Email: Georg.Szalai@thr.com

Twitter: @georgszalai