Time Warner’s Jeffrey Bewkes

PREMIUM: Jeffrey Bewkes, the chairman and CEO of Time Warner, tells World Screen that he remains confident that the focus on producing and distributing film and television content for all platforms will ensure a prosperous future for the company.

WS: What can you tell us about the bid last summer from 21st Century Fox, and what was your main objection to the offer?
BEWKES: We thought we could have a more successful and valuable future on our own, and we feel really good about the company’s position. If you look at where we are today, we believe—and we thought this when we rejected the proposal—that we can continue to deliver buzz-worthy, award-winning content and greater shareholder value on our own. Why do we think that? Over the last five years, many things we’ve done have made us a more focused company with a very strong competitive position. You remember we had a cable business, a music business, a publishing business and an online business in AOL, and we wanted to focus Time Warner on the exploding video-content business. If you look at where we are now, we are the largest film and TV production studio in the world at Warner Bros.—just Warner Bros. We don’t need another company to be in that position. HBO is the largest premium network in the world, by subscribers, by revenue, by earnings and by original programming, and Turner Broadcasting has three of the top-ten basic cable networks in prime time. In fact, if you look at the Turner channels—TNT, TBS, CNN, Cartoon Network, Boomerang, truTV and Turner Classic Movies—it is the most concentrated broad-reach, must-carry set of channels in the cable world. It doesn’t have a long tail of smaller marginal networks. If you take all of that together and add our operational results, whether it’s our earnings growth or our stock growth, it puts us at the top of the media industry along with Disney and, frankly, at the top of the S&P 500.

WS: Once the bid was dropped, what actions did you take to improve Time Warner’s performance? Did you view the company differently as a result of the whole process?
BEWKES: No. We had been executing a plan that we had put in place five or six years ago. The core of our strategy has been, and it remained through this process, to be the industry-leading scale player producing high-quality branded video. We wanted to distribute that on traditional platforms, like the multichannel bundles all over the world, and also on emerging platforms like the VOD broadband platforms. We are one of two companies—I think Disney is the other—who have, over the last four or five years, dramatically and steadily increased our investment in programming. Whether it’s the slates of films or TV shows at Warner Bros., or the acquired series on Turner, or the original shows on Turner and HBO, we’ve been ramping up throughout the company. That lead in programming, plus strength in our brands on a global basis and in earnings growth, has given us the ability to embrace, and in many cases be the anchor tenant of, new technology models to meet consumer demands, emphasizing the idea of the Content Everywhere strategy across all our businesses. Examples of that would be HBO GO, UltraViolet at Warner Bros. for movies, and CNN Go, which I think is the leading VOD product in the news business.

HBO NOW is a good example of a broadband-only, on-demand product that has global potential. We also have some very strong digital brands that I think merit more attention. In addition to CNN GO, there is also TMZ in celebrity news and Bleacher Report in sports, which is number two behind Yahoo! Then we have short-form digital content studios at each one of our networks and at Warner Bros. The business is evolving rapidly, and we think we have a responsibility to ensure that our company is well positioned for growth going forward.

WS: Tell us about the decision to launch HBO NOW.
BEWKES: HBO was the first network in the world to be on demand, which happened at least 15 years ago. It’s important to point that out. The original pioneer of on demand was HBO. That was through the set-top box and the cable infrastructure. In the last 15 years since HBO On Demand started, there has been an increasing broadband capability in the U.S. As we’ve said over and over, we have the rights to all of our programming on HBO, and we were just thinking about when would be the right time to launch a product that is VOD over broadband. When [the U.S.] got to about 10 million broadband-only consumers last year—and that number is growing—and we considered the changing behavior among the younger demographic, we thought, we’d launch the HBO NOW product to make HBO available to this group. About half of the 10 million broadband-only consumers already subscribe to a VOD video service, whether it’s Netflix, Hulu Plus or Amazon, and they are natural consumers of HBO. So it’s obvious that we need to make it available over the method that these consumers have chosen to receive video.

WS: While HBO NOW helps attract cord cutters or cord nevers, how are you convincing your traditional partners, the cable, satellite and telco companies, that HBO NOW is good for them, too?
BEWKES: We’re doing that in a couple of ways. It is often the cable companies that are providing the broadband service over which any video broadband service, whether it’s Netflix or HBO, travels. So VOD is a natural part of the business they are in as they move more and more to increase their broadband business. We’ve been in discussion with all our existing distributors, as well as new digital partners, like Apple, to offer HBO NOW. If you look from any distributor’s point of view, think of Comcast or Verizon or Time Warner Cable, it’s in their best interest to have a full suite of programming alternatives depending on which consumer they are talking to. Some people want the traditional cable video-broadband-telephone triple play. Increasingly, there’s going to be the question of whether mobile gets added by these distributors to that triple-play package. Every distributor, whether it’s a cable company or a telco or a satellite company, has a number of customers that want broadband only. As partners we have to offer all of these methods so consumers can watch programming on the big screen or take it with them as they leave the house.

WS: In the future, do you foresee online services similar to HBO NOW for any of the Turner channels?
BEWKES: We don’t currently have a plan to offer channel-by-channel product for TNT or the other Turner channels, but we’re continuing to make our content available across platforms. CNN already has a good on-demand product with CNNGo. The Turner content is already available on several over-the-top platforms like Hulu or Sony PlayStation Vue, Dish has Sling TV, which offers Turner content on broadband. In April 2015, Turner and Hulu announced an extensive multiyear licensing agreement that gives Hulu the exclusive SVOD rights to previous seasons of Turner programming from Cartoon Network and Adult Swim, as well as select current and upcoming series from TNT and TBS. This is the first-ever licensing agreement between Turner and Hulu. In February we also launched TNT GO, which is an over-the-top service in Latin America available in both Spanish and Portuguese. It’s accessible on iOS and on Android smartphones and tablets. It includes both live linear TV channels and VOD options from those channels. It is offered through Turner’s pay-TV partners, which means the regular distributors in Latin America.

WS: Do you see OTT platforms around the world affecting the Turner channels worldwide?
BEWKES: Over-the-top bundles could be an interesting way to attract younger consumers to everybody’s channels, including Turner’s. These new internet-based products can also innovate more quickly in terms of consumer interfaces. That’s interesting because there is a real wealth of programming on the Turner networks. Having so much volume of programming across so many channels means that interface and recommendation engines become very important to helping consumers find and discover all the shows.

WS: There is so much programming; sometimes there aren’t enough hours in the day to catch up with everything you want to watch.
BEWKES: That’s the point, and in TV, like so many have said, we have a golden age in terms of the quality and caliber of the writers, directors and actors. You have budgets in TV now—think of Game of Thrones—that are on the level of major theatrical releases. So the quality and number of shows and hours are going up. For consumers it means being familiar and satisfied with a favorite brand, whether it’s HBO, TNT or whichever network brings you fresh shows. Then, finding which ones are good and which ones you don’t think are good becomes more and more important.

WS: Looking at Warner Bros., I’m told, and correct me if I’m wrong, that blockbuster movies nowadays are made for countries like Russia and China, and that the safest bet to be profitable is for a studio to create franchise movies that are action-packed without too much dialogue because they will translate better. Several years ago you told us that mid-budget movies were an important part of Warner Bros.’ mix. Financially speaking, are they becoming less attractive today?
BEWKES: I can’t answer that with a simple yes or no. We think Warner Bros. has the biggest and most diverse slate in the industry. It has more big-budget tentpole franchises than any other studio, but it also has a bigger release slate of character-driven films and mid-budget movies that we’re very proud of and that continue our mission of making different top-rate programming. Some of those mid-budget films turn out to be big hits; think of The Blind Spot or American Sniper and others we’ve done. The reason this question is hard to answer is that the creative process is neither simple nor formulaic, should it be. Warner Bros. is a filmmaker-centric studio and we do have a tentpole strategy, led by DC Entertainment’s IP, The Lego Movie and the upcoming Fantastic Beasts and Where to Find Them from J.K. Rowling, which is part of the Harry Potter franchise. That’s a pretty diverse and fairly large set of big-budget projects. But we are also succeeding globally with mid-sized films and smaller-budget projects, particularly in comedy, horror and drama/suspense.

Of course, it is a global business and the Chinese market is getting particularly strong, which presents a huge growth opportunity for the studios. But I think, given the nature of the world, we can’t really agree with your assessment. To say, whether you think it’s Russia, China or the international market in general, that films are being made to have less dialogue I don’t think is accurate or fair. I know you’re not saying it as a criticism. We’re trying to make films that are authentic to whatever the subject matter is; whether it’s a comedy or a drama, you want it to be authentic. You want it to feel relevant to today’s audience. If you make a film that is too commercially formulaic, I doubt it will be a film of lasting impact. Economically, the best thing to do in filmmaking is to make a film with lasting value.

WS: Success in broadcast television is elusive. Does a show based on a comic-book character have a better chance of beating the odds? Are these shows helping you capture the attention of Millennials?
BEWKES: They are, but if you have success with a show based on a comic-book character, the reason is not because you are picking up the audience of the comic. The reason is that a successful comic-book character, if it’s reasonably well conceived, can provide the basis for an interesting and engaging world and for strong character development. If you look at the shows that have succeeded, like The Flash, Arrow and Gotham, those are very current shows with engaging characters with a lot of different relationships. Those shows aren’t completely similar to the plots or the contexts of the comic books. It’s a different medium, right? The comic book is a series of still pictures. A lot is communicated without words. You can’t do the lengthy dialogues in comic books that you have to do in television shows. If you take Supergirl, which airs on CBS this fall, we expect younger viewers to embrace it as they have those other hits. And while these shows have attracted Millennials, they have also brought viewers of all ages into the tent. But Warner Bros. Television, which has more than 60 shows on broadcast, is not mostly relying on superheroes. We have every genre from drama to comedy to non-scripted. We’re expanding our efforts and look at widening the range of shows we are interested in.

WS: Do you think in five years Netflix and Amazon will be able to deliver the large quantity of award-winning shows that HBO does?
BEWKES: Maybe. They will probably have the budget to do it. I don’t know whether the creative result will be the same. There is no inherent reason why a committed programmer—if they become that, and they seem to want to do that—could not get into that level of output and quality. Technically we consider anyone vying for viewership as a competitor. But our focus is on our viewers, not on our competitors. If you think about what we did in original programming at HBO; at Adult Swim, which is huge with a certain age group; at TNT; and at TBS, we did that in the shadow of the giant show budgets of CBS, ABC, NBC and FOX. Those sources of program development, competing shows and competing development budgets have always been out there. We are no longer newcomers in this business, and it’s not surprising to us that some other companies, like Amazon and Netflix, join it. It means more competition but also more financial resources and creative resources flowing into the neighborhood, some of which we think we are going to take advantage of.

WS: Looking ahead a couple of years, where do you see growth? Do you view international acquisitions as a component of this growth?
BEWKES: No, not so much. The growth is in consumer engagement with video programming. It’s happening as television multichannel plants are being built all over South America, Asia, Africa and Eastern Europe. It happens as broadband capability to deliver programming over internet connections to all kinds of connected devices on demand is getting stronger. Fueling all that, you have the explosion of an infrastructure on TV and broadband. You also have a steady increase, with some interruption, of consumers’ financial ability to pay for services and content. So there’s a very secular, buoyant trend in video consumption across the world. VOD just makes it better. It makes the content, and engagement with it, possible for more people. It also makes it possible to watch programming less expensively than you could before. Billions of people who couldn’t see the programming that was on TV ten years ago are now able to see it in a way that is economically feasible for them, and on demand, so it fits their schedules. That is where the growth is. If you look at our company over the last five years, that gives you a pretty good indicator of the next five; we’ve been ramping up production of original programming and VOD capability both domestically and globally. The acquisitions we’ve done have tended to support more diverse types of production, not just in the U.S., and more platforms that we can deliver it over.

Regarding mergers and acquisitions, we don’t think that’s the principle growth driver. That’s just people moving around their assets, and in the network business it’s the quality of networks you have that matters, not the number of networks. If you go to a distributor, as we have, with five to seven strong basic networks and a couple of the world’s strongest premium networks, that’s a very attractive offer for distributors and for them to make to consumers. If you added marginal networks to that collection, it wouldn’t help.