With characteristic dry wit, Time Warner President/COO Jeff Bewkes gave an upbeat picture of the media company’s fiscal health heading into the new year. In a lunchtime Q&A with UBS media and cable analyst Aryeh Bourkoff this afternoon at the Grand Hyatt in Manhattan, Bewkes spoke about recent changes at AOL, Time Warner Cable’s (TWC) plans to make a public offering and the strong performance of the company’s television assets.
Bewkes mapped out the company’s key priorities for 2007 across three areas: the continued transition of AOL from a subscription-based to a free, ad-supported service; the “integration and absorption” of Adelphia cable systems into TWC; and continued expansion in the digital space.
“I think we have the best management team now in the Internet space—barring everybody,” he said in praising new AOL Chairman/CEO Randy Falco, who recently jumped over after more than 30 years at NBC.
Bewkes characterized AOL’s transition as “going exactly as we thought” in terms of how the changes might “disincentivize” both former subscribers and distribution partners. But he noted that ad revenue was up 40%-plus in the last two quarters and that the service has signed up five million accounts since it went free on Aug. 2—two million of which were not former subscribers.
Acknowledging the phenomenal popularity of social-networking sites like MySpace and Facebook, Bewkes questioned the value “buying traffic” through an acquisition of such a company without first having the capability to monetize it. Asked by Bourkoff if AOL had any acquisition plans in the coming year, Bewkes replied: “I’m not saying we would, per se, quote ‘buy traffic,’ but we could.”
He was similarly restrained in his comments about Time Warner Cable’s planned stock offering, tied to its acquisition of Adelphia. Citing restrictions on disclosure due to the registration period, he declined to give a timetable on the offering, telling the room “Don’t worry about it. Just take a vacation and come back.”
Asked if the company might scale back its ownership of the cable operator to as low as 50% anytime soon, Bewkes joked, “Well, I feel like [Bill] Clinton now: What’s the definition of ‘soon’,” then allowed that it probably wouldn’t happen next year.
Bewkes was most bullish about the performance of Time Warner’s TV properties, particularly its Turner networks TNT and TBS. With ad sales in the 3rd quarter up 9% year over year and affiliate fees “going up nicely,” he noted that Turner was drawing a large share of the audience now abandoning the broadcast networks, thanks to shows like The Closer on TNT and the enviable line-up of off-network comedies, including Seinfeld and Friends, produced by Warner Bros. Television
“We get a big TV profit pipeline that goes out five years,” Bewkes said, thanks to the back-end success of Warner shows. “We’ve just built a second view of that pipeline because we have 27 shows on network TV across all 6 networks,” including Two and a Half Men and Cold Case.
Though Time Warner’s theatrical business finished strong this year, Bewkes acknowledged that filmed entertainment performed “slightly under” projections thanks to “three dogs in the summer.” He declined to name names, saying that “if I say anything against any one of our movies, I end up with a director calling me to say, ‘How could you say that about my movie?’” But he appealed to the audience, saying: “You gotta ask yourself, just for you personally, would you have made The Poseidon Adventure? Again?”
By Joel Topcik