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Jeff Bewkes: HBO OTT Video Service Won't Hurt Pay-TV Ecosystem

10 Dec, 2014 By: Erik Gruenwedel

HBO CTO resigns as premium channel chooses third-party service for reported spring rollout of OTT video

Launch of HBO’s much-anticipated over-the-top video service reportedly could take place by next April, with assistance from an unnamed third party in the rollout.

News of the third party, which one media report suggests is MLB.tv, prompted HBO CTO Otto Berkes to tender his resignation after two years in the position.

“I feel that this is the right time for me to move on from HBO so that I am able to fully pursue my passion building world-class technology teams, products and businesses,” Berkes wrote in a staff memo, as reported by The Wrap.

HBO in October announced plans to roll out an OTT service targeting 10 million broadband-only households that don’t subscribe to bundled channel programming. CBS-owned Showtime Networks is expected to launch a SVOD service as well.

Speaking Dec. 9 at the UBS 42nd Annual Global Media and Communications confab in New York, Time Warner CEO Jeff Bewkes dismissed concerns the HBO OTT video service could threaten the lucrative pay-TV market of about 100 million households — of which about 30 million subscribe to HBO.

“We don’t think that would happen. We’ve been doing [HBO] 20 to 30 years. We’ve seen Netflix in five years go to 35 million homes. It didn’t do anything to [bundled channel households],” Bewkes said.

At the same time, the CEO reiterated it makes no sense for the bundled channel ecosystem to go direct to consumer with “a-la-carte” plans. But Bewkes added only half of broadband-only homes are using subscription streaming services such as Netflix, Amazon Prime Instant Video and Hulu Plus.

“[They] are natural consumers of HBO,” he said.

The CEO said there are another 10-15 million households paying for basic cable that “ought” to have HBO. He said the premium channel hasn’t been effectively marketed to these households.

“We’re hoping to make that available,” Bewkes said.

Bewkes told the investor group HBO OTT and video–on-demand represent avenues to “accelerate” revenue at Time Warner at a time when television ratings have softened.

Bewkes said he doesn’t believe SVOD has contributed to a softness in ratings, adding that a third of the decline could be attributed to Nielsen’s challenged measurement metrics.

He said Nielsen’s single-digit ratings decline for The CW, when juxtaposed by available distribution channels (recorded, TV Everywhere and on-demand), are actually up 10%.

Bewkes said ratings for “Gotham,” the new Batman prequel series Warner Bros. Television created for Fox TV and licensed in the pay-TV window to Netflix, are two-to-three times the size of their initial network broadcast.

“It’s obvious whether it’s people viewing beyond the measurement time period, whether they’re on platforms that aren’t easily picked up, whether it’s the Nielsen viewing sample, or whether it’s SVOD (some of it is), we don’t think the [declined] viewing numbers are secular trends,” he said.

The CEO said ubiquitous access to the consumer (notably millennials) is when video generates its greatest selling power. He said the entire industry is moving in that direction.

“It is as clear as it can be for more than 10 years at HBO, and a few years in the case of Netflix, if you put the show on demand, people really get engaged to it. It will enliven the creative process because it means you can make a complicated show over a longer time period than a one-hour episode or two-hour movie,” Bewkes said. “That is what has brought the vitality back to programming.”

Separately, HBO Dec. 9 launched “Game of Thrones: The Compendium,” a website (gameofthronescompendium.com) enabling fans of the series through March 28, 2015, to submit art, music, costume, food, craft and analysis for possible inclusion in the printed compendium. Submissions will be judged by a council of editors.

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