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SVOD Seen as Lifeline to Broadcast and Retail

6 Aug, 2014 By: Erik Gruenwedel

HBO catalog 'The Sopranos' went to Amazon Prime

Time Warner CEO Jeff Bewkes says the recent deal with Amazon Prime Instant Video for HBO programming reinvigorates the brand among affiliates, retail and younger demo

The transformation of Time Warner CEO Jeff Bewkes from SVOD antagonist to SVOD evangelist is almost complete.

Speaking Aug. 6 on the media company’s quarterly call, Bewkes said Warner Bros. could expect to see a significant increase in the $400 million it generated in 2013 from licensing content to subscription streaming services such as Netflix, Amazon Prime Instant Video and Hulu Plus, among others.

“We're going to be up solid double-digits [this year]. And by that I don't mean 10% to 20%, I mean more,” Bewkes said.

Such bravado toward subscription streaming is in stark contrast to 2010 when Bewkes characterized SVOD, and Netflix in particular, as a minor nuisance akin to the invading Albanian Army.

A lot has changed in the intervening years. Packaged-media sales have softened, brick-and-mortar video rental stores have disappeared, and Netflix (and Amazon Prime) have evolved their content offerings (and spending) to the point that simply licensing old studio movies doesn’t cut it anymore.

Yet monetizing content and extracting the maximum value for movies and TV shows (especially overseas) remains a priority for a content holder such as Time Warner, whose studio and television production arms rank among industry leaders.

“We think there’s an increasingly competitive set of buyers out there, including Netflix, including Amazon and some others,” Bewkes said.  “And so we’re very confident we’ll effectively monetize our content, and we're actually pretty happy with the way we've timed or sequenced the release of our library, and you're going to be seeing more about that as the years go on.”

The HBO Factor

Among Time Warner’s portfolio of assets is HBO, the multichannel video program distribution channel that long ago jettisoned its business model as pure pay-TV distributor of theatrical movies. The brand has evolved into an incubator of original episodic programming — a tactic now emulated by Netflix, Amazon, and to a lesser extent, Hulu Plus.

HBO received 99 Primetime Emmy nominations in July, the most for any network for the 14th year in a row and more than double the nominations of the closest competitor for the second consecutive year, according to Time Warner. Nominations included Outstanding Drama Series for “Game of Thrones” and “True Detective,” Outstanding Comedy Series for “Silicon Valley” and “Veep” and Outstanding Television Movie for Muhammad Ali’s Greatest Fight and The Normal Heart.

HBO in the second quarter upped operating income 19% ($89 million) to $548 million on revenue of $1.4 billion.

As the former CEO of HBO, Bewkes has a particular affinity for the brand, and thus the decision to license HBO catalog for the first time to a third-party SVOD platform underscored the senior executive’s changing mindset.

“Amazon is distributing [classic HBO content] to a lot of viewers and households that don't have HBO,” Bewkes said.

More importantly, the CEO eyes Amazon’s cachet as e-commerce behemoth, selling lots of HBO (and Warner Bros.) content on discs and electronic sellthrough. The Amazon brand helps elevate the value of HBO, regardless of the distribution format, according to Bewkes.

“From the point of view of our cable and satellite and telecom distributors, it's a fantastic thing because you have the resources and marketing of Amazon to a sub-base [of consumers] that, frankly, our distributors didn't have as much penetration as they would like,” he said.

In other words, Bewkes believes licensing HBO to Amazon Prime elevates the value of the brand and content to multichannel video program distributors such as cable, satellite and telecom.

“It's actually given everybody a new enthusiasm, and particularly our underperforming affiliates, on marketing more HBO and realizing that they can do much better,” he said. “What we're seeing is essentially, a regeneration of really the upside of what distributors realize they can do with HBO.”

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