Jeffrey Bewkes, who oversees a company that includes the TNT, TBS and HBO cable networks, also predicted a “massive amount of competition” for Netflix Inc. (NFLX) and Hulu LLC as more content owners make their TV shows available through operators on demand and online and as cable and satellite companies improve their experiences.

“When all of the content on the big screen works like the content on the little screen what will happen? The programming will trump the interface,” he said.

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A group of pay-TV operators, including Time Warner Cable Inc. (TWC), Dish Network (DISH) and Verizon Communications Inc. (VZ), filed a petition Tuesday asking the Federal Communications Commission to change its rules to require arbitration and prevent broadcasters from pulling their signals during fee negotiations. The issue also could come up at a Capitol Hill hearing Thursday.

Several TV providers also sent a letter to influential members of Congress Tuesday, asking them to “carefully examine the circumstances that have resulted in the current imbalance in retransmission consent negotiations.”

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Underwhelmed

The majority of TV ad buyers say they think their spots are less useful than they used to be. At least according to a new study from Forrester-ANA, which surveys top advertisers: 62 percent feel TV ads “are not as effective” as they were two years ago.

The Forrester (FORR) study is full of nuggets that will cheer those who want to radically transform the TV ad model. For instance:

• Ad buyers have reduced the amount they are spending on TV and are now allotting just 41 percent of their budgets to the boob tube, compared with 58 percent in 2008.
• 66 percent think DVRs “will destroy or reduce the effectiveness” of the 30-second ad.
• They overwhelmingly hate the existing metrics used to measure TV programming.
• 63 percent think Google (GOOG) will dominate “tomorrow’s big advertising winners,” ahead of cable operators (53 percent), cable networks (47 percent) and broadcast networks (nine percent).

So when can we declare traditional TV ads DOA? No time soon. Even in decline, TV ads are a $70 billion business, give or take a billion, and it’s going to take a lot effort to move an industry that size–even mighty Google has had no luck to date.

This should change early next year, but in the most limited way. Hulu plans to let users in the U.K., and most likely, other countries, access its U.S. site to watch a single show: The made-for-the Web reality series, “If I Can Dream.”

The show comes via 19 Entertainment, owner and creator of the “American Idol” franchise, and has a similar theme: It will follow five would-be stars as they try to make their way as actors, singers, etc. They’ll live in a Hollywood house wired with HD cameras and microphones, and viewers will be able to follow them live, seven days a week, via a streaming Web video site.

That footage will be edited down to a 30-minute weekly highlights show for Hulu. And that’s the show that should provide many international viewers with their first glimpse of Hulu, owned by GE’s (GE) NBC, News Corp.’s (NWS) Fox and Disney’s (DIS) ABC.

The press release announcing “If I Can Dream” says “it will be the first recurring show to be available to select international audiences via Hulu,” though it doesn’t spell out which countries or a time frame. But I’m told the series is set to start running early next year and that the U.K., where 19 Entertainment is based, is one of the countries slated to get access.

There’s still a possibility that the international plans could fall through. However, 19 Entertainment owns the show outright, which ought to make things easy. And both Ford (F) and Pepsi (PEP), which have already signed on to underwrite much of the show’s costs, advertise internationally, which ought to make things even easier.

But since “If I Can Dream” will use recorded music as a soundtrack, clearing the rights to every song in every territory could pose a problem.

That uncertainty should also help explain why Hulu has taken so long to expand the rest of the site to other countries: Even when Hulu finds major TV partners that want to work with it–which isn’t always a given–sorting out rights problems for every show or movie can be a lot of work.

Meanwhile, a few notes on “If I Can Dream”:

• Hulu and 19 Entertainment, which is owned by Bob Sillerman’s CKX (CKXE) licensing shop, don’t seem exactly sure how to describe the new venture. Hulu’s press release calls it a “post-reality entertainment show.” But 19 Entertainment’s PR guy asked me specifically to avoid calling it a reality show. “It’s a Web experience,” he explains. Okay, then.
• Whatever you want to call it, at least parts of “If I Can Dream” will seem familiar: There’s the Peeping Tom component of “Big Brother,” mixed with “Idol’s” star-making. And if we’re lucky, some drunken debauchery a la “The Real World.”
• The most interesting element is the show’s path to Hulu: 19 Entertainment originally pitched the show to broadcast and cable networks, which hemmed and hawed, I’m told. But sources say Hulu jumped at the chance to run the show as an exclusive. Theoretically, if it does well enough on the Web, it could end up on conventional TV next year, too. But “If I Can Dream” is designed to turn a profit without leaving the Internet.
• The show is synergized from the get-go: In addition to the Ford, Pepsi and Hulu connections, it will also use promotion from News Corp.’s MySpace, which will help run a talent search to find new faces as the old ones cycle out. And Clear Channel (CCO) will use its network of radio stations to promote the talent.
• The cast of five seems to be composed of exceptionally good-looking people. If you’re trying to view this clip from outside the U.S., you’ll have to take my word for it:

That won’t help employees at Time Warner’s Time Inc. publishing unit: The company confirmed that it will make big cuts this quarter and spend up to $100 million on restructuring charges. This is different from the $100 million in cuts that had been previously reported, but it will still mean hundreds of layoffs at the publisher.

Time Warner also boosted its guidance for the remainder of the year and confirmed once again that it wants to spin off AOL before the end of the year. As well it should: The company said it has already spent a staggering $24 million on the spinoff so far this year, which includes $9 million in “pretax direct transaction costs (e.g., legal and professional fees).” It has spent another $83 million in restructuring charges at that unit in 2009.

As usual, Time Warner said ad sales have been lousy, but that its cable networks and film divisions had done okay. The breakdown:

• Cable networks: Revenue up five percent, because subscriber fees were up nine percent. Ad revenue was down one percent.
• Warner Bros. movie studio: Revenue down four percent, because of slumping DVD sales.
• Time Inc.: Revenue down 18 percent; advertising down 22 percent. Adjusted operating income down 42 percent. Hence the coming cuts.
• AOL: Revenue down 23 percent. Subscription revenue, which will continue to shrink, was down another 29 percent, and ad revenue, which is supposed to improve one day, was down 18 percent.

As it is, now that investors and analysts have heard the more plausible deal–instead of buying NBCU for $35 billion, the cable giant kicks in up to $6 billion in cash, plus its cable networks, and gets 51 percent of NBCU–they’ve decided they hate that one, too.

Here’s the story in the graphic form (click chart to enlarge):

The Comcast-NBCU story broke after the market closed on Wednesday, in case that wasn’t clear. As I’m typing this, Comcast (CMCSA) is trading around $15.6 a share, down some seven percent since the talks became public.

Pull back a bit and you see that things could be much worse: As recently as March, Comcast was down below $12, and there wasn’t any multibillion dollar deal weighing down the shares then.

If anything, investors are much more forgiving to Comcast here than the professional chattering class of writers and analysts, who hate the deal. The conventional wisdom: Comcast’s dream of marrying cable programming with its cable service is misguided because media conglomerates like Time Warner (TWX) and News Corp (NWS) have already tried it and concluded that it didn’t work. If the Roberts family spends money on anything, they argue, it ought to be on shareholders, either via dividends or by buying back shares.

Here’s a sampling of today’s sentiments:

Pali Capital’s Rich Greenfield:

Comcast is trying to become a massive player in content…a move that investors should be frightened about, regardless of the initial “math” surrounding the transaction.

Barclays Capital Vijay Jayant:

Press reports of this potential transaction give credence to investor concerns that management has empire-building aspirations in general or that they may not believe enough in their own distribution business over the long term and therefore need to diversify their portfolio holdings…fundamentally, we believe that Comcast shareholders would be better served if the company were to invest in its own shares.

So if this is a trial balloon, you wouldn’t say it has been shot down completely. But it’s certainly sagging.

Crawford’s thinking: After Time Warner ditches AOL, which is scheduled for a spinoff later this year, the company will ditch its magazine business as well. That will leave it with a portfolio made up only of a movie studio and cable networks, and a big cash pile to play with.

Time Warner won’t comment, but I’m sure the company has heard Crawford make this prediction before. His Capital Research Global Investors owns more than eight percent of Time Warner shares, which means he gets plenty of access to Bewkes and his lieutenants.

But here’s the thing: The body language from Time Warner executives in recent months makes me think they intend to keep at least part of their magazine business in the family. More than body language, actually: “Time Warner without People? I can’t imagine it,” one well-placed Time Warner official told me recently.

That said, I won’t be surprised if the publisher employs fewer people, producing fewer magazines in the future.

Time Warner officials have repeatedly said that Time Inc. has too many titles: The magazine unit publishes 23 magazines in the U.S. How many can you name? And last year’s mass layoffs, while unprecedented for the publisher, were still fairly modest compared to other publishers’ cuts. The six percent reduction left Time Inc. with some 9,400 people on the payroll.

But executives at the publisher love to stress, off the record, that its flagship titles–Time, People and Sports Illustrated–are each on track to generate millions of dollars of profit this year, even though ad pages and revenue are down. And while Time Inc. certainly hasn’t figured out its digital business yet, at least some of its print properties could and should do well on the Web, as People.com is already doing.

There are certainly assets that Bewkes and company could dispose of fairly easily. For instance, its U.K.-based IPC Media unit, which handles many of the 90-plus titles it publishes outside the U.S., is frequently brought up as a sale candidate. But I’d be surprised if he got rid of Time Inc. and its iconic brands altogether.

For the record, here’s how Time Inc. performed in the first half of the year. The company has already said it expects similar numbers for the remainder of 2009 (click table below to enlarge).

But you won’t be seeing full-length shows or movies from Time Warner (TWX) on the world’s biggest video site–it’s saving those for cable companies that play along with its “TV Everywhere” plan.

So: If you want to see bits of programming from networks like CNN and the Cartoon Network and shows like “Gossip Girl,” you can check them out on YouTube in coming months. But if you want to see the whole thing, you’re either going to have to watch them on your TV set or via Web experiments like the one Comcast (CMCSA) is trying out for its subscribers.

Nothing wrong with clips, by the way: There’s a lot of TV programming (in particular) that lends itself well to bite-sized sampling–Turner’s “Adult Swim,” for instance should be great (see below). But YouTube has been trying to get networks and studios to give up full-length stuff and hasn’t had a lot of luck, at least not compared to the offerings at Hulu.

YouTube’s Jordan Hoffner, who hammers out these deals, wouldn’t go into detail about them with me, but he confirmed that they follow the same rough template as deals his company has forged with Sony (SNE) and Disney (DIS): The content providers get to embed their own video player within YouTube and control ad sales.

Are there more pacts in the works? Sort of, Hoffner says: “We’ve gotten a lot of deals done. You look at the media landscape, and there are only a handful of companies left that we don’t have partnerships with.”

In the meantime here’s a grainy, unsanctioned clip that I hope makes it onto YouTube in a higher-def form once the deal kicks in: Indie rock gods Pavement performing on “Space Ghost” in 1997.

That has all changed, as seen in two deals in the past week. On Sunday, Microsoft (MSFT) sold its digital advertising agency Razorfish to French advertising giant Publicis Groupe. This followed closely on the heels of Google’s (GOOG) sale of its Google Radio advertising business to WideOrbit, a closely held company with a leading position in managing advertising on cable networks.

These deals give an indication of how the circle of competence for the two technology-led giants has changed. A decade ago, a key differentiator of a digital agency was technology and its understanding of how the then-mysterious internet functions.

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Cablevision made the announcement in conjunction with its Q1 financial results. The company posted Q1 revenue of $1.9 billion, up 10.6 percent from a year ago, and in line with estimates. Revenue at the MSG unit was $271.3 million, up from $265.1 million a year ago. Adjusted operating cash flow improved to $590 million from $515.9 million for CVC overall; for MSG it totaled $15.9 million, up from a loss of $2.5 million.

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