“As a category more often than not you end up ahead” with the big-budget extravaganzas, the Time Warner CEO told investors today at the Jefferies Global Technology, Media and Telecom Conference. Despite the high costs, franchise properties are “more predictable” and “are more profitable and less risky than medium or small” budget films. Studios deserve some credit for learning from their mistakes. “In the old days the sequels were weaker” and less interesting than the original productions. With Harry Potter, though, “we made eight of them. They were all successful…but they were not the same.” Jeff Bewkes also saluted Disney’s handling of Iron Man, following the weekend success of Iron Man 3. That “shows you how you can build a franchise if you’re good at it, and all of the studios are getting good at it.” Even so, Bewkes pitched investors on the virtues of television — which he says continues to grow overseas and via online distribution. Once his company spins off its magazine publishing operation “basically 90% of Time Warner is now a television company…That’s the new Time Warner.” Indeed, Kevin Tsujihara landed the top job at Warner Bros in part due to his background in television and in finance, Bewkes says. As for his most troubled TV network, CNN, the CEO says that under Jeff Zucker “you’re seeing a lot more bounce in its step these days.” He’s optimistic about …
“We have the rights to do it and we would do it if we thought it was in our economic best interest,” Jeff Bewkes says this morning. But the potential market for a stand-alone HBO streaming service in the U.S. is “not sufficiently big enough now.” HBO chief Richard Plepler in March raised some consumers’ hopes that they might soon be able to subscribe to HBO without first buying basic cable: He said that it could make sense to package HBO GO with cable or phone company broadband services. Bewkes noted, though, that HBO and Cinemax have about 40M subscribers via U.S. cable and satellite services. Time Warner wants to protect those relationships: Distributors’ pricing and marketing decisions are even more important than the quality of the programming when it comes to influencing churn rates at the premium channels. Even so, Bewkes says that at Time Warner “we always look at opportunities to increase distribution” — and it already offers HBO GO without a pay TV subscription in Scandinavia. “We’re always going to keep evaluating it depending on the country.”
Jeff Bewkes doesn’t fear that his company will be squeezed by Netflix’s growing desire for exclusive programming — a potential issue at Viacom where Netflix says it won’t renew their broad licensing deal at the end of this month. “We thought that would happen,” Bewkes told analysts today. “It’s a good trend for us….We think we’re in the catbird seat.” Time Warner is already selective about the shows it licenses. Execs add that as much as 35% of the revenue from streaming deals it made in Q1 won’t involve Netflix including a “considerable portion” from outside the U.S. “We’re in active negotiations with all of the major players,” Bewkes says. While streaming revenues are meaningful, they’re just part of a much bigger business: Subscription VOD providers last year accounted for more than $350M in Time Warner’s revenues — a figure that execs expect to grow in 2013. That’s still just about 10% of the company’s TV syndication, although it doesn’t include what Bewkes calls “pretty significant” sales from The CW Network, which Time Warner shares with CBS. Bewkes also says that he doubts many pay TV viewers will ditch HBO in favor of Netflix as the streaming service becomes more popular. “These are very complementary things” for people who are willing to pay extra for TV programming, he says.
The proxy filed at the SEC this afternoon says that the CEO’s contract emphasizes long-term performance over year-to-year metrics. Still, Jeff Bewkes shouldn’t complain about his compensation for a year when Time Warner shares appreciated nearly 30%. His package includes $2M salary, $6.9M in stock awards, $3M in option awards, $13.6M in non-equity incentives, $219,560 change in pension value, and $167,943 in other compensation. Most of the “other” pay is for his personal use of the company aircraft. Time Warner says that “for security reasons” Bewkes was given a car and driver and “was encouraged to use Company aircraft for business and personal use.” Bewkes’ pay was 4.5 times higher than the median for his four closest colleagues, just a tad better than last year’s 4.6 times but still well over the line (3 times) that makes corporate governance watchdogs fear that a CEO wields too much power.
Time Warner’s talks with Meredith Corp about combining their magazines in a separate company collapsed today. But here’s Plan B for the media giant: It will spin off its publishing arm into an independent, publicly traded entity, likely by year end. Until recently, Time Warner execs scoffed when asked whether they’d consider mimicking News Corp, which is spinning off its newspaper assets. Now, though, Time Warner CEO Jeff Bewkes says the idea provides “strategic clarity” that will enable his company to “focus entirely on our television networks and film and TV production businesses.”
Don’t tell the Time Warner CEO that cable and satellite subscribers are fed up with rising prices, and tempted to replace them with some combination of free TV and Web services such as Netflix. Pay TV is “getting to be a better deal for consumers and a better deal in the opinion of consumers,” Jeff Bewkes told investors at the Deutsche Bank Media, Internet and Telecom conference. “Even in this recession, you don’t have cord cutting.” What’s more, TV viewing is up at a time when “you have increases in the quality and programming budgets of all these networks.” When companies including Time Warner Cable and Dish Network offer low priced packages with relatively few channels “nobody buys them.” And TV Everywhere will make consumers more attached to pay TV. “It’s all going on demand, on every Internet device you have for free because you have a subscription.” What if he’s wrong, and consumers want something cheaper? Time Warner will still be fine, Bewkes says. “We all know that the reason [prices are] up is the sports fee, it’s not anything else. Half of citizens don’t want that.” But 90% of his company’s affiliate fees come from four networks including TNT and TBS that are built around entertainment. If consumers want bundles without sports then “we’ll be in their bundles.” And low priced offerings would lower the threshold for subscribers to also subscribe to HBO. “That would be great for HBO,” Bewkes says.
The Time Warner CEO says he gave the top studio job to Warner Bros‘ former Home Entertainment Group chief Kevin Tsujihara in part because he “has the greatest breadth of experience across Warner Bros’ businesses” including TV, theatrical, digital, and consumer products. Bewkes told analysts that “Kevin’s going to be a great leader”, adding that he’s “very thoughtful about the future of the studio business.” He also praised the operation’s “very strong group of executives” including Bruce Rosenblum at Warner Bros Television Group and Jeff Robinov at Warner Bros. Pictures Group. “All of those executives have very strong benches of people beneath them,” he adds. “I’m very optimistic about how that’s going to go.” CFO John Martin says that, as far as he can tell, Warner just reported the “highest quarterly profit any studio has generated in any particular quarter.” He added that with upcoming films including Man Of Steel, Hangover 3, and the second installment of The Hobbit the company expects Warner to have “another strong year in 2013…as good if not better than 2012.” Execs say that the home entertainment business has stabilized, with growth in digital sales offsetting the decline in DVDs. But TV production accounted for about 60% of Warner Bros profits, and the television ecosystem generated 85% of Time Warner profits last year while 10% came from …
UPDATED SHOCKER! Kevin Tsujihara To Become Warner Bros CEO; Bruce Rosenblum And Jeff Robinov Didn’t Find Out Until Late Last Week; “I’m Disappointed; Who Wouldn’t Be?” Rosenblum States; “Excellent Choice,” Robinov Says
2ND UPDATE (includes Robinov statement): Hollywood is stunned. Time Warner Chairman/CEO Jeff Bewkes just destabilized Warner Bros in a big way with today’s shockingly unexpected announcement that Kevin Tsujihara will take over Warner Bros on March 1st. I actually heard this two weeks ago from a source – and I didn’t believe it. That’s not a knock on Tsujihara’s ability. But no way Bewkes could ignore the fact that Bruce Rosenblum‘s Warner Bros Television Group accounts for 50% of overall Warner Bros revenues.* But Bewkes did. “Obviously, I’m disappointed; who wouldn’t be?” said Rosenblum, the TV president who was actively campaigning for the post, in a surprisingly candid statement. ”Warner Bros is a unique and special place and I know it will be in good hands with Kevin at the helm. I continue to be proud of our accomplishments and I have the most respect and admiration for our amazing team at the studio – a team that is thriving in an ever-transforming business.” Warner Bros Film Group topper Jeff Robinov at first remained silent and his office told Deadline it was “highly unlikely” he would have a statement. Now, one has been released – and it’s studiedly upbeat: “I am truly happy and proud of Kevin. We are both good friends and colleagues and I think he’s an excellent choice for the job. The Company will be in great shape under his leadership,” said Robinov. In fact, insiders tell me that Bewkes further humiliated Rosenblum and Robinov by not telling them about the choice of Tsujihara. I understand the duo had to hear about it at the last minute late last week from outgoing Barry Meyer.
[*Time Warner doesn't break out Warner Bros in its financial statements so that statistic may include Turner which doesn't report to Bruce. Warner Bros results are included in the 'Film And TV Entertainment' unit. It accounted for 40% of Time Warner revenues in the first 9 months of last year - $8.3B out of $20.6B - but just 17% of operating profit - $676M out of $3.9B. While Time Warner doesn't break out numbers for Warner Bros Television, it has revenues for "Theatrical Product" and "Television Product." Theatrical product accounted for $4B in the first 9 months ($1.4B from film rentals, $1.3B from home video and electronic delivery, $1.1B from TV licensing, and $127M from consumer products and other). Television product came to $3.4B ($2.6B from TV licensing, $617M from home video and electronic delivery, and $208M from consumer products and other).]
Here’s what Bewkes and Meyer said about their decision in a joint statement: “Given the talent, depth and strength of the Warner Bros’ leadership, selecting our next CEO was not a decision that could be made hastily or lightly. But we both agreed that Kevin is the right person to lead Warner Bros. and to build on its proud heritage as the world’s most storied content producer… In 2005, Kevin was appointed to head the then newly formed Home Entertainment Group, which he has skillfully led through a difficult transition and which remains number one in the industry by every measure. Just as importantly, he is a leading voice in creating and deploying new digital models to ensure that we remain market leaders. We’ve both been very impressed with Kevin’s strategic understanding and intuitive grasp of the evolution of the consumer’s interaction with our television shows, films and video games, and his ability to visualize how our products will be enjoyed in the future.” Warner Bros Home Entertainment’s division covers home video as well as the company’s wide ranging videogame properties and investments, digital distribution, anti-piracy, and emerging technology operations
Few thought Robinov was seriously in the running for the top job since he’d only taken over as film studio president in Spring 2011 from outgoing Alan Horn (now heading up Walt Disney Studios after Bewkes unceremoniously kicked him to the curb). But conventional wisdom was that Rosenblum, who took over the TV group in 2005 the same year that Tsujihara took over Home Entertainment, had a near lock on the job – especially if Bewkes decided not to go outside. And an appointment of Rosenblum would have continued Meyer’s TV leadership at Warner Bros and therefore not been questioned. Sounds to me like Meyer betrayed Rosenblum. Of course, Rosenblum still has an alternative power platform as Chairman of the Board of the Academy Of Television Arts & Sciences since November 2011. Robinov, meanwhile, has kept and is keeping his head down, immersed in developing powerhouse franchises like The Hobbit and perhaps Man Of Steel to replace Harry Potter and the most recent Batman trilogy.
Undoubtedly, Tsujihara’s new appointment will spark debate inside and outside Hollywood over whether Home Entertainment is most important to the future of Big Media. And whether content or platform/delivery should dominate. Of course, Bewkes could have (and in my opinion, should have) done nothing for several more years, and simply allowed his Warner Bros troika to coexist as equals. Now Bewkes, especially given the harshly crude way he handled this announcement, is risking the loss of two superlative executives. Keep tuned.
Time Warner CEO Jeff Bewkes just delivered the funniest line I’ve heard so far at the UBS Global Media and Communications Conference (a low bar, to be sure) as he talked up his company’s movie business. In addition to a slate that includes The Hobbit, Man Of Steel, and The Great Gatsby, he dryly says, “Hangover is coming back with a different plot. So it’s all good.” His optimism extends to the exhibition business in general, which he said at a lunch presentation is “pretty healthy” in the U.S. and several other countries. But Bewkes reiterated his concern about home video. “There’s a niche shift to rental, kiosk rental, that’s less profitable,” he says. A vigorous supporter of the entertainment industry’s UltraViolet streaming initiative, Bewkes says he hopes to “make ownership [of content] more easy and valuable, which we haven’t so far succeeded to do.…One way or another, in the long run, we think it’s a business that can grow, although it isn’t growing as fast as television.” As for the Warner Bros studio, Bewkes says that “even in the film side, which is supposed to be more variable, we’re been pretty steady.” He adds that the early feedback on The Hobbit is “very good.”
The comments from the Time Warner CEO at the UBS Global Media and Communications Conference contrast with what we heard here yesterday from cable operators like Time Warner Cable and Charter. They say that consumers can’t afford to keep paying the rising prices for the basic bundle. Bewkes counters that if consumers had the freedom to just subscribe to the channels that they want “you’d end up having to pay more for less.” And for pay TV distributors “it is a growing pot. They have to decide who gets the money and who drives the value.” Obviously, Bewkes believes his company has a strong claim: He says that Time Warner expects to see double digit increase in pay TV affiliate fees from 2013 to 2016, reflecting its channels’ higher ratings and ability to award VOD and TV Everywhere rights. Bewkes acknowledges that expensive sports channels — which face rising costs to buy rights to popular leagues — “may be an issue. I don’t know what will happen with that.” But for now, he says “I think the bundle is going to continue, The utility, power and value of it is going to go up.”
Time Warner just disclosed a few more details about the new employment agreement it announced last week, which is designed to keep Jeff Bewkes as CEO through 2017. Although Bewkes‘ base salary remains $2M a year, and his target bonus stays at $10M, the target for his long-term compensation increases to $16M a year from $10M the company says in an SEC filing. Last week Time Warner didn’t mention the boost in long-term comp; it just said that it would be “tied directly, and solely, to future financial and shareholder returns.” The new package eliminates restricted stock that would have value upon vesting even if the publicly traded shares dropped. If the company fires Bewkes without cause before the contract ends, then it has to pay him his salary and bonus — the average of his two highest payments over the previous three years — for another two years. But Bewkes can’t compete with Time Warner, or help a competitor, for at least a year. There won’t be any severance payments if he or the company decides not to extend the contract beyond 2017.
We’ll have to wait for Time Warner‘s SEC filing to see most of the terms. But the company announcement says there’ll be no change to Jeff Bewkes‘ base salary and bonus target, and that his annual long-term incentive awards will be “tied directly, and solely, to future financial and shareholder returns.” Since he became CEO in 2008, the value of Time Warner’s shares has declined 8.7% while the benchmark Standard & Poor’s 500 fell 6.5%. But over the last 12 months, the company is up nearly 36% while the S&P is +11%. Bewkes’ total compensation package came to about $26M in 2011 and in 2010. Here’s the release:
NEW YORK, November 20, 2012 – Time Warner Inc. today announced a new employment agreement with Chairman and Chief Executive Officer Jeff Bewkes, extending his term another five years through 2017.
Execs have thought about the idea. But Time Warner CEO Jeff Bewkes told analysts this morning that the concept of creating a subscription-based channel featuring productions from Warner Bros and HBO “is not ready for primetime.” He left the door slightly ajar, though, adding that “I don’t want to rule it out, exactly.” The problem is that his company’s shows appeal to lots of different audiences. “Comedies are different than dramas. It doesn’t make sense for us to have an all-genre network…[People] go to the Food Network expecting something different than TBS.” Besides, Time Warner already has a thriving business supplying the broadcast networks — it has at least two shows on every major one — as well as existing streaming services led by Netflix and Amazon. “We think that the better way to play it,” Bewkes says.
Time Warner CEO Jeff Bewkes just threw a bucket of ice water on the idea that Netflix chief Reed Hastings raised last week in his quarterly letter to shareholders. “While we compete for content and viewing time with HBO, it is also possible we will find opportunities to work together – just as we do with other networks,” Hastings said. “Consumers who are passionate about movies and TV shows are quite willing to subscribe to multiple services.” Perhaps. But Bewkes isn’t interested in seeing HBO programming appear on Netflix just yet. “There are not talks going on between HBO and Netflix,” he said in his quarterly call with analysts. Although he acknowledges that “sometimes other relationships emerge over time” between competitors, when it comes to Netflix he added: “Not now.”
The entertainment giant’s CEO kicked off his quarterly earnings call with analysts by paying homage to the shooting victims in Aurora at a showing of Warner Bros’ The Dark Knight Rises. He voiced ”our profound sadness about the terrible events” and added: ”Our deepest sympathies go out to the victims of this appalling crime, their families and their loved ones.”
Time Warner CEO Jeff Bewkes and News Corp COO Chase Carey took the message to The Cable Show this morning, urging attendees to jump on the Internet video bandwagon — even if it means relaxing their grip on the relationship with their customers. “We’ve just got to do it faster,” Bewkes says about TV Everywhere, the service that enables subscribers to watch TV shows on mobile devices. Carey agreed that “it should go faster,” adding that “we get too hung up on protecting the rules of the past.” That was a subtle swipe at pay TV distributors who covet their gatekeeper role. Many fear that they could lose control once subscribers begin to use an iPad or other device to access shows directly from programmers — without a need for the operator’s set top box or on-screen guide. ”We’ve got to find a way to make all of these experiences easier to use and more accessible,” Carey says. “That requires us to work together.” Bewkes agreed. “Let consumers use the interfaces they want,” he says. “You’ll still have your subscriber relationship. We can’t develop the best, world-class interfaces at the scale that a distribution company has. Silicon Valley, the Internet industry, is a global industry and that’s what they do. We should harness that….Don’t try to hold that back. Consumers won’t allow it.”
Time Warner CEO Jeff Bewkes showed tonight on PBS’ Charlie Rose that he and Rupert Murdoch may be the only Big Media moguls who can talk about the business without sounding like they were manufactured by IBM. Bewkes even had some interesting things to say, although most of his observations came from his greatest hits collection — and you could go dizzy trying to follow a train of thought from Charlie Rose’s zig-zag questioning. For example, Bewkes says that while the prospects for the movie business are bright, the days of having releases appear in theaters a few months before they’re available on home video are numbered. “Everyone in the business, including theater owners, has an interest” in getting to a point where films will be available everywhere early on, he says. Acknowledging that “this is a dangerous question,” Bewkes says that execs will work together and “be as thoughtful as we can to do it in a way that doesn’t undermine the theater experience.” But he doesn’t see how the industry can continue to wait months before offering a movie to home viewers. ”You create a gap for piracy,” and consumers “have to get what they want.”
It sure sounded that way a little while ago when Time Warner CEO Jeff Bewkes was telling analysts about the reasons why he likes HBO GO, the premium channel’s new streaming service. Subscribers frequently use it to catch up on HBO‘s original series — and the company is “dramatically increasing the number of original series on HBO.” As a result: “We have the luxury of choice if we want to drop a studio, and we’re going to evaluate that.” The channel didn’t renew its carriage deal with DreamWorks Animation; beginning in 2013 its films will appear on Netflix in the premium network window. HBO also gave up DreamWorks Pictures live-action films in 2010 when distribution rights shifted from Paramount to Disney. But last year HBO signed a deal with Summit to show its films released beginning in 2013. HBO also offers films from Fox, Universal, Focus Features — and, of course, its sister studio Warner Bros. Bewkes says that, in addition to being popular online, original series fuel worldwide growth. Some 93% of the people who use HBO GO say that it makes them more loyal to the channel, Bewkes says.