Castle in the Sky: Jeff Bewkes' Time Warner

I must say, I've got to hand it to his guy.  Of all the media moguls out there right now, Bewkes seems to be the only one who's walking the talk.  Since 2009 he has seen Time Warner grow in quarterly profits while companies like NBC Universal and Viacom continue to falter.  Sitting behind News Corp, Time Warner is the second largest media company and, thanks to Bewkes' decision to streamline his company and spin off Time Warner Cable and money drain AOL, he's in the enviable position of operating from a strong base, with modest debt and a war chest of $5 billion in cash.

What does he know that other moguls don't?  For one, he sees dollar signs in the union of film and tv programming and video games.  Video games have been the one sector of the entertainment industry that has seen steady growth since the beginning of the decade, and, as reported by Ars Technica,  the industry is expected to hit $70 billion by 2015.  For Bewkes, that number is too big to ignore.  Rather than scoop up large unwieldy content generators like NBC Universal, Bewkes has quietly focused on acquiring videogame publishers and developers.  And while some critics have been snarking at Bewkes' feet dragging in picking up the MGM library (TW already owns the the studio's pre-1986 vault), Time Warner's has seen its revenue from vidgames rise from $100 million in 2007 to $510 million in 2009, according to the company. Let's be honest--it's unlikely that the Lion is going to be roaring to the tune of that kind of cash.  And by controlling the ability to produce content in publishing, film, tv and now videogames, they have the ability to create properties that can completely pervade the marketplace, such as with The Green Lantern reboot.

TV Everywhere?  While Bewkes' TV Everywhere strategy has a lot of critics, I must say i'm impressed with his inventiveness when it comes to preserving the bottom line.  TV Everywhere will offer viewers online on demand programming so long as they are already paying customers of cable, satellite or telco TV services.  This preserves the hefty monthly fees that cable service providers rely on, and the fees collected from these providers by the cable channels.  These fees can reach up to $3.65 per subscriber per month for a channel like ESPN, so its clear why either side would be loathe to give these up.  This arrangement also makes it less likely that the cable, satellite and telcos will block access to your favorite shows, which it might have considered had you and all your friends canceled your cable TV subscription in favor of streaming everything on Hulu.  Although its still unclear what the business model will look like, or how advertising will factor in, its clear from their supporting partners that the idea is being taken VERY seriously (TWC and Comcast have solicited the support of big TV broadcasters including NBCU, Viacom’s MTV Networks and CBS--the only one of the four nationwide free-to-air networks not to have put its programming on Hulu).  Comcast began a nationwide test of the system at the end of last year.

I'm interested to see if Bewke's bets prove to be intelligent and lucrative, or if the moves he's made were solely the product of well-timed luck.  While his caution Hollywood-wise has produced a slew of tent pole yawn-fests, as a businessman, he seems to be doing what is best for his empire.