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Bewkes: All Warner Movies to be Released on VOD with DVD

30 Apr, 2008 By: Erik Gruenwedel

CEO Jeff Bewkes April 30 said Warner Bros. will release all forthcoming titles on video-on-demand (VOD) the same day as DVD for the rest of the year.

For some time the media giant's cable unit, Time Warner Cable Inc., has aggressively tested — with other studios and cable operators in Denver and Pittsburgh — the fiscal impact on packaged media sales when offering new movies on demand the same day as DVD.

Bewkes, in an investor call, said VOD margins surpassed DVD rental margins and underscored his belief that all packaged media would ultimately move to digital distribution.

“That should have positive margin implications that will boost consumption, too,” Bewkes said. “It will take time, but we are using our position in the industry to lead this transition.”

He said that by acting now, Warner would be able establish a leadership position in VOD similar to its No. 1 ranking in DVD sales.

“Based on our history in pioneering DVD sellthrough, we think moving first will also enable us to capture disproportionate VOD share on this move,” Bewkes said.

Separately, Bewkes said Time Warner would sell its 84% stake in Time Warner Cable under the right circumstances, i.e. price.“We continue to be very optimistic on the prospects of the cable company and cable industry,” he said. “We just believe the two entities would ultimately be more valuable if separated rather than kept in the current structure.”

The CEO said the company was working with the cable unit's management to iron out details of a separation.

It would appear to be a good time for Time Warner to sell its cable stake considering revenues for the unit increased $309 million, to $4.2 billion, spurred by a $301 million rise in subscription revenues and a $99 million increase in video revenue, the latter largely through VOD price increases.

Bewkes said the media giant had successfully transitioned New Line Pictures from a “potential source” of cost savings to a completely restructured entity. He said the studio would be run under the Warner Bros. corporate umbrella at a “fraction” of the previous costs.

“We expect the reorganization will generate substantial cost savings and mostly because we will retain international rights and revenue improvements,” he said.

Time Warner's filmed entertainment division reported $116 million in costs related to the New Line restructuring with estimates of another $20 million to $30 million in costs through the rest of the year.

The division also recorded $50 million in charges related to films released in prior quarters.

Without those charges, operating income before depreciation and amortization for filmed entertainment increased 19%. Operating income declined 25% ($60 million) to $183 million.

Revenue increased 4% ($97 million) to $2.8 billion due to theatrical and DVD results for I Am Legend and carryover DVD sales from Harry Potter and the Order of the Phoenix, among others.

Bewkes remained bullish on Blu-ray Disc and said he expects industry software sales to reach $1 billion this year, up from the company's previous estimates of $700 million to $800 million.

He said Warner Blu-ray movie sales have over-indexed relative to theatrical revenue when compared to other studios releasing BD content.

Finally, Time Warner reported first quarter (which ended March 31) fiscal 2008 revenue of $11.4 billion, compared to $11.1 billion during the same period in the last year.

Net income for the period fell 36% to $771 million, compared to $1.2 billion last year.

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