Bewkes: Subscription VOD Undermines Hollywood

7 Mar, 2011 By: Erik Gruenwedel

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Time Warner CEO Jeffrey Bewkes March 7 continued his assault on subscription-based video-on demand (VOD) services such as Netflix and Amazon (and separately kiosks), which he said could challenge Hollywood’s ability to make movies and TV shows.

Speaking at the Deutsche Bank Media and Telecom Conference in Palm Beach, Fla., Bewkes reiterated support for the Time Warner-coined “TV Everywhere” concept, which he said allows monthly pay-TV subscribers to access unlimited new and repurposed content on demand in the home and on portable devices no additional charge.

While Bekwes characterized “TV Everywhere” as the ultimate VOD business model, he said he considers Netflix and Amazon streaming (with $6.50 to $8 monthly fees) and $1 rental kiosks as distribution channels better suited toward economically less attractive content.

“If you look at what that [sub fee] can pay for, it is probably content that does not have a higher use in an earlier higher-value window,” Bewkes said. “I think the place for that much exposure of the product is in another time period.”

Indeed, only when Warner couldn't find a buyer for seasons of discontinued "Nip/Tuck" did it agree to license the series to Netflix for streaming.

With Warner Television and Warner Studios among the largest producers of original TV programming and movies, Bewkes said licensing content directly to subscription VOD on street date presents direct competition to current more lucrative revenue channels.

“If you are selling movies for $14 a DVD and renting them for $3 or $4 a night, you don’t do the same thing for a buck a night, or all you can eat in the same window,” he said. “You move that window back. I think that is the place for subscription VOD.”

Bewkes said cable, satellite and telecommunication operators maintain Hollywood’s status quo, which includes pay-TV, ad-revenue and multiple payer (subscriber) revenue streams.

Online distributors, by comparison, don’t offer multiple revenue streams, the CEO said. Media companies are increasing facing challenges trying to figure out how much of their programming they want to sell directly to third parties and how much they want to give it to third-party subscription aggregators that essentially devalue the product.

“You have to remember that [the streaming] model does not pay to support the infrastructure [to make content],” Bewkes said.

He said that as the market fills with start-up digital services clamoring for content, license deals would reflect the difference between a start-up versus a service (such as Amazon) with embedded subs that “frankly came from another business, which is mail order. “

 

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