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Time Warner CEO Weighs in on Economics of Kiosks, Netflix

16 Sep, 2009 By: Erik Gruenwedel


Time Warner CEO Jeff Bewkes Sept. 16 said Warner Home Video and others are trying to match rental windows with price points in light of the growth of $1-a-night kiosks, including those run by Redbox.

Warner Home Video last month announced it would bypass its distributors and offer new-release packaged media directly to rental kiosks 28 days after street date. The move resulted in Redbox filing an antitrust lawsuit against Warner Home Video.

“I think there will be [a push for higher prices on new releases from studios] and I think [these efforts] are underway now,” Bewkes told an investor group in New York.

Without addressing specific price points or strategies, Bewkes said the studio is determining how to weigh the rental alternatives at increasingly lower price points with the realities of physical and electronic sellthrough.

“We think there is a place for what I would call very low-priced rental but not obviously in the middle of when you are trying to sell higher-priced rental and [sellthrough],” Bewkes said.

Warner Bros. Studios and Warner Home Video top the theatrical and home entertainment markets, respectively, in terms of revenue and market share.

Bewkes said the studio was in discussions with kiosks to supplant $1-per-day rentals with higher-priced new release content and delay lower-priced rental in order to “get better economics.”

“Otherwise it is not rational for us to put our product out in this form and undermine what we already have in the market,” Bewkes said. “We believe this will be resolved quickly.”

Last month, the studio also announced it would revisit license agreements with Netflix that included revenue-sharing provisions. Speaking Sept. 16 at an investor event in San Francisco, Netflix CFO Barry McCarthy said the service generated about 50% of its revenue from rev-share agreements.

Bewkes characterized online DVD rental pioneer Netflix as having “good aspirations” that nonetheless have resulted in economics he said didn’t make sense “for us.”

The CEO said the studio and Netflix were engaged in discussions on how to continue offering consumers “the benefit of what they offer,” which he said included a strong catalog library.

He said it was possible the studio would increase allocation of Warner Bros. Television content to the online DVD rental pioneer’s streaming channel.

Bewkes said that as Netflix and other entities create alternative distribution models, the studio is determining the proper “economic participation” needed to perform that function for consumers.

“That is what we are looking to get to in our studio deal with Netflix, in terms of what they offer consumers,” he said. “We think there is a way for [Netflix] to offer consumers a lot of choice on all product provided that there is a reason for us to participate with them in making that product available.” 

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