Bewkes Lays Out Vision for Time Warner

NEW YORK, February 7:
Presenting his first set of financials since being named CEO of Time Warner, Jeff Bewkes unveiled his strategy for improving the company’s stock price,
including cost cuts, a change in the ownership structure of the cable business
and the spin-off of AOL’s Internet access operation.

“Our goal is to increase
the value of the company and its stock price on a sustainable long-term basis,”
Bewkes said in a presentation to investors. “We have to succeed in three
missions. One, operating our businesses with better performance and returns
than our competitors. Two, we have to have the right businesses and the right structure.
And three, we need to manage our balance sheet and deploy capital to the right
places, including, when appropriate, directly to our shareholders.”

Bewkes noted plans for an
initial round of cost cuts on the corporate level, with some 100 positions due
to be eliminated. Another key area for cost cuts is at New Line Cinema, Bewkes
said. The question currently being explored, he said, is “whether it still
makes sense for us to have two completely separate studio structures. We’re
reviewing how to operate New Line more effectively.”

Bewkes continued:
“Corporate and New Line won’t be the only areas where we will reduce costs.
Managing costs isn’t a one-time initiative; it’s a way of doing business. But
cutting costs only goes so far. We have to innovate and invest in the future of
our businesses at the same time.”

Bewkes said this includes
being “more revolutionary than evolutionary” in the approach to new-media
opportunities. “All linear ad-supported networks should make their programming
lineups [available] on demand and on television sets, not just on broadband.
It’s a win-win for consumers and networks alike. So we’re going to be
aggressive in putting our own networks on demand, so we can show the industry
the benefits of this model.”

At AOL, Bewkes said it is
time to complete the “transition from a declining ISP subscription business to
a growing Internet ad business.” As such, Time Warner is “working on separating
AOL’s access and audience businesses so we can run them independently. This
should significantly increase AOL’s strategic options for each of these main
business sectors.”

At the cable business,
meanwhile, Bewkes noted that the current ownership structure—in which
Time Warner owns 84 percent, with 16 percent owned by the public—“is less
than optimal for both companies. So we’re initiating direct discussions with
their management and their separate board of directors regarding our ownership.
We expect to reach a decision on whether and how to change our ownership level
by our first quarter earnings report at the end of April.”

Bewkes stressed: “Nobody
should think that we’ve lost faith in cable’s business prospects. Quite the
opposite; we think it is undervalued, substantially undervalued.”

—By Mansha Daswani