Here’s a riddle. What do a classical music radio station in the U.K., a partially pornographic pay movie channel in Scandinavia, a news channel, a rock channel, a regional broadcaster and a family theme park in Germany, have in common?
Answer: Almost nothing. Except that Time Warner has minority stakes in all of them.
Time and Warner, first separately and then together, have been scouting new broadcasting opportunities in Europe since the early ’80s, longer than almost any of their major league competitors. But all they have to show for more than a decade of meetings and consultants’ fees is a curious patchwork of investments in apparently unrelated ventures.
Now a new generation of execs at Home Box Office and Warner Bros Intl. TV are taking their turn to crack the conundrum of TW’s Euro strategy
Kurt Wiebranz, who took charge of HBO’s international expansion six months ago, and Jeff Schlesinger, who took over the reins at WBITD last year, are taking stock of past decisions and looking for new ways forward.
TW execs insist that there is more communication between the two wings than ever before, and that a number of major new deals are under consideration. Among the possibilities: a strategic linkup with CLT for digital pay TV; a bid, in partnership with the Kirch Group and Saudi investors, for Silvio Berlusconi’s TV holdings in Italy; and the launch of Warner-branded cable and satellite channels in the U.K. and other territories.
The Time Warner story in Europe is one of false dawns and missed boats. The corporate dustbins are full to overflowing with torn-up blueprints for Euro TV ventures which spent several expensive years on the drawing board but never quite made it to fruition, through a mix of bad luck and bad timing.
“These were the first Americans over here a decade ago,” observes one European media exec with many years of experience dealing with TW. “They’ve achieved nothing, and they could have been involved in anything .”
For seasoned Time Warner watchers, it’s a familiar story of the company’s feudal structure conspiring with the shackles of debt to prevent the company from pulling its weight.
One of Time Warner’s greatest problems has been coordinating the separate agendas of HBO, Warner Bros. and its international TV division, Warner Music, and Time Warner Intl. Broadcasting, the dedicated corporate development unit set up by the late Steve Ross.
HBO, spearhead of the European advance, has rarely been able to marshal the formidable resources of the Warner program and film catalog to support its cause, and the debt load ensured that there was little appetite for taking on significant financial risks.
Neither Wiebranz nor Schlesinger could be reached for comment, but some TW execs were willing to talk freely about the company’s historic problems in Europe and its prospects, on condition of anonymity.
“HBO could have been in Murdoch’s position in Europe, and they blew it,” says one long-time TW employee. “They never planted any seeds in the ground; they just walked across the field.”
“When Western Europe was really warming up, Time and Warner were in the thick of their merger,” recalls an HBO exec. “The entry fees in Western Europe are pretty high now. There were strategic errors made when the opportunity was there to get in more cheaply.”
Late last year, the two execs most closely identified with TW’s international broadcasting strategy left the company. Tom McGrath, president of TWIB, went on to higher things at Viacom, reportedly frustrated with TW’s corporate ambivalence about international expansion. Lee de Boer, Wiebranz’s predecessor, was made a scapegoat for HBO’s lack of progress overseas and told to clear his desk after 18 years with the company.
Since then, there seems to have been a subtle shift in emphasis. The increasingly cosmetic distinction between HBO and TWIB has been finally abolished, and their efforts have now been pooled. Together, they have tightened their focus to concentrate mainly on film-driven pay TV options, although they remain committed to the existing eclectic slate of investments.
Close observers detect another shift, as TW’s chairman Gerald Levin waters down the globalist vision of Ross – away from the pursuit of new investments and toward making sense of what they have done.
Meanwhile, Schlesinger’s WBITD continues to concentrate on maximizing sales revenues from the studio’s catalog. But with the international market for American TV series stagnating, this also involves seeking opportunites to launch Warner channels via cable and satellite which can consume large quantities of such programming. Warner is widely rumored to be eyeing a possible investment in the U.K.’s Children’s Channel in the U.K., owned by TCI-subsid Flextech.
The U.K. has probably given Time Warner, and specifically HBO, more headaches than any other overseas territory.
It backed the TVS bid to retain its ITV franchise in 1991, mainly in order to cultivate a link with TVS’ French shareholder Canal Plus, but was disqualified for overbidding. An HBO-backed consortium was the only bidder for the Channel 5 license in 1992, but again failed to win because the broadcasting authorities judged the financial plan to be unsound. Earlier this year, Wiebranz pulled HBO out of the bidding for Channel 5 second time around.
TW’s most successful British investment is the Classic FM radio station. HBO also partners the ITV company Anglia TV in its production and distribution companies, Anglia TV Entertainment and Itel. These are all stand-alone investments, with little relationship to TW’s other European activities.
Farrell Meisel, TWIP senior VP, argues with some justice that doing nothing is better than doing something stupid. “In some degree it’s smart business – if the deals aren’t there, there’s no need to force a deal.”
In Germany TW has established a presence with niche channels and regional broadcasting. Under John Janas, the German chief who is now also managing director of TWIB U.K., it has acquired 23% of CNN-backed news web n-tv, 24% of Berlin’s IA and 24% of Hamburg 1, as well as an 18% stake in Viva and a bid for a broadcasting license in Stuttgart. All except Viva are loss-making, with no immediate prospect of breaking even.