Peter Kafka

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Time Warner's Jeff Bewkes: We Love Netflix! They Can Have All Our Old Stuff!

Last fall, Time Warner CEO Jeff Bewkes began publicly beating up on Netflix, in interviews where he compared the video rental company to “the Albanian army“–or, alternately, a “200-pound chimp.”

And semi-privately, Bewkes’ lieutenants have been suggesting that they’re going to pull back on content they supply to Netflix, and may cut it off entirely in the near future.

There’s definitely some theater involved here, put on for the benefit of investors worried that Netflix poses a threat to several of Time Warner’s properties: His Warner Bros. studio, its Turner cable networks, and its HBO premium cable network.

Because even while Bewkes and company have been lobbing spitballs at Netflix, they’ve been talking to the service about new distribution deals, sources familiar with the companies tell me.

In any case, Bewkes has been taking pains to soften his rhetoric recently. Last week, at the Tribeca Film Festival, he sent some verbal bouquets toward Hastings. And today he did much the same during Time Warner’s earnings call.

I’ve transcribed and edited Bewkes comments below. But he’s wordy, so even my abbreviated version runs long. Short version: We’re cool with Netflix because they’re complementary, not competitive. But that means we’re not going to give them our newest stuff, either.

This also happens to be what Hastings himself says. But more on that later. Here are Bewkes’s comments from this morning’s conference call:

Analyst: Can you talk about your relationship with Netflix?

Bewkes: Our view of Netflix has been very consistent. I’ve tried at times to be humorous about it, sometimes to make a point, so let me be clear: We think there’s definitely a role for subscription VOD services, library services, and Netflix in the ecosystem.

What is the role? Clearly it’s a way to give consumers access to a deep library of content that they couldn’t easily get before, particularly older shows. Although they’ll probably be able to get them more easily in other places now.

But it’s been a useful thing to get subscription services for products you couldn’t get before. There’s been some utility for viewers in being able to get serialized shows that don’t play as well on traditional cable networks or in syndication.

And because SVOD monetizes some content that couldn’t be monetized before, and it monetizes some content better than it was monetized before, particularly the older library stuff, then it can add money to the ecosystem. And that’s good for everybody.

But what we’ve always said is that you need to make sure SVOD doesn’t devalue the content and disrupt the ecosystem. So our view has been that it is not usually the right outlet for the newer, higher-value content that is functioning much more powerfully for viewers, on other kinds of networks, in other windows.

We’ve said because of all of that that we do not think it would be a suitable substitute for multichannel TV for most consumers. And therefore, we don’t think it will upend the multichannel TV business.

Q: Can you talk a bit more about cord-cutting, and whether you think Netflix and other Web services encourage it?

Bewkes: We watch it closely, but we haven’t seen it yet.

I think Netflix has around 23 million subs in the U.S. But we believe there are only about 4 million households that have broadband and no multichannel TV. And that number is almost unchanged since Netflix started its streaming service.

So even though people like the service, it has not led to very many Netflix subs cutting the cord. Looking forward, it’s hard to see how subscription TV becomes a replacement for multichannel TV.

Because as far as we can see, it probably won’t be able to economically offer a lot of the current shows, sports, live events, first run things of all kinds, that are available on all the high-value networks. And we don’t think that very many subscribers are going to be willing to give those things up.

We don’t think U.S. consumers want less choice. The record of the last 30, 40 years has been they want more choice.

Just to really acid test that, there are already a number of stripped-down TV packages that are available. And very few consumers take them.

Dish Network has a “focus on value” package, and its lowest-priced package is $24.99. Most people don’t take that, which is why the average revenue at Dish is closer to $70.

And then add the last part of the puzzle, which is you can see it this week at HBO GO: TV Everywhere [which means] VOD availability, for all the networks everybody loves. It’s going to make the current network subscriptions, foremost among them HBO, even more palatable.

So this really suggests that things like Netflix are welcome additions.


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