Time Warner CEO Not Concerned With OTT Video Cannibalization27 Sep, 2016 By: Erik Gruenwedel
The pay-TV ecosystem reportedly is losing millions of subscribers to alternative distribution channels, notably over-the-top video. Media giant Time Warner — a major supplier and generator of content to multichannel video program distributors — has projected a sub decline from 1% to 1.5% for the year. CEO Jeff Bewkes thinks it’s closer to 2%.
Yet, speaking to an investor group recently, Bewkes embraced OTT video. Indeed, Time Warner recently acquired a 10% stake in Hulu — the subscription video-on-demand service co-owned by Disney, Fox and Comcast — for $583 million.
“The investment in Hulu reflects Time Warner’s continued commitment to supporting innovative digital services that allow consumers to access high-quality content however they want it across a variety of platforms,” said the media company.
The investment comes as Goldman Sachs contends Hulu is losing money, lots of it — burning through about $450 million a year. Bewkes isn’t concerned.
“If you look at the valuation going in, we think that [investment] is fine. We’re not expecting it to take a lot of cash [investment] in the future from us,” he told the Goldman Sachs Communicopia confab Sept. 21.
Specifically, Bewkes likes what OTT video is bringing to pay-TV: Innovation. He said the rise in online TV services seeks to mirror pay-TV while offering improved great consumer interfaces and attractive price points. He lauded Comcast Cable’s Xfinity and broadband-based X1 set-top that have embraced OTT video with improved user-interfaces, on-demand content, cloud-based storage and streaming functionality.
“The motivation of distributors of all kind to essentially become more creative developing different channel packages … kind of points the way for others [MVPDs] to do better,” Bewkes said. “I think that’s where the solution is going to come from."
The CEO welcomed the integration of Netflix on X1, saying that if Comcast didn’t make a deal with the SVOD juggernaut, other MVPDs would.
As a content supplier, online TV and OTT video offer ancillary revenue channels beyond the pay-TV ecosystem. Any threat to linear TV distribution is overblown, according to Bewkes.
“If existing subs move from pay-TV to OTT, it’s not a problem for us. We’re not trying to forcibly move things. We’re trying to add distribution choices for consumers.”
Indeed, emerging online TV platforms are licensing content and channels from Turner Networks, HBO and Warner Bros. There are five TW properties distributed on Sling TV, PlayStation Vue and the pending Hulu Live service.
With the rollout last year of HBO Now, the SVOD service used BAMTech, the subsidiary tech unit of Major League Baseball Advanced Media. Bewkes said reliance on third-party tech to grow proprietary OTT video services is done on a case-by-case basis. He said HBO Go is back-end supported in-house.
Last year, Turner Broadcasting System acquired a majority stake in iStream Planet, which co-handled OTT tasks at the Rio Olympics and Super Bowl.
“We want to have the capability to handle our own services. We want to have options,” Bewkes said.