Time Warner’s Bewkes Disses HBO Spinoff Theory
Time Warner isn’t interested in spinning off HBO, Chairman Jeffrey Bewkes said Wednesday during the company’s Q1 earnings teleconference. BTIG analyst Richard Greenfield had laid out a case for why the company should let HBO stand on its own. He said spinning it off could reduce Time Warner’s leverage and give HBO and Warner Brothers Studios the freedom to experiment with new business models, such as bypassing pay-TV operators.
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Bewkes threw cold water on those arguments. “It doesn’t make any sense for us to consider spinning off HBO,” he said. “We love having HBO, it’s a strong performer and it aligns really well with the scale of our other networks.” The leverage Time Warner gets with distributors by owning HBO and its Turner networks is valuable, Bewkes said. “We don’t think it will be viewed more valuably separate from us."
HBO isn’t inhibited in its business plans as a part of Time Warner, Bewkes said. HBO has the ability to offer its service directly to customers and bypass traditional cable operators, but it has chosen not to because it wouldn’t benefit HBO enough, he said. “The reason we haven’t done it has to do with the interests as HBO assesses them. It has nothing to do with any conflict with any other part of Time Warner."
To the extent Netflix and other subscription VOD services offer new outlets for syndicated programming and library studio content, it benefits the entire entertainment industry, Bewkes said. It “monetizes some content that couldn’t be monetized before, and monetizes some content better than it was before,” he said. But it needs to “make sure SVOD doesn’t devalue to the content and disrupt the ecosystem,” he said.
Despite Netflix’s success in adding subscribers, the number of U.S. households that buy broadband but not pay-TV has remained stable around 4 million, Bewkes said. That indicates that pay-TV customers aren’t willing to ditch their cable service for online video yet, he said. “Even though people seem to like the Netflix service, it hasn’t led to many Netflix subscribers cutting the cord.” Bewkes said services like Netflix won’t be able to afford offering current hit shows, sports and live events that make up popular linear TV programming.