Bewkes began the session Wednesday at Time Warner Center by stressing that the company has had a strategic advantage in being streamlined over the past few years into core operating divisions that have industry-leading brands with plenty of opportunities for international expansion.
Although Bewkes never uttered the word “Fox,” the presentation was spurred by Time Warner’s aggressive rejection of an $80 billion unsolicited takeover offer this summer from 21st Century Fox.
In rebuffing Rupert Murdoch’s overture, Bewkes told Wall Street that Time Warner shareholders would be better off by allowing the streamlined conglom to execute on his vision of focusing on three core operating divisions: Warner Bros., HBO and Turner Broadcasting. The last element of Bewkes’ drive to winnow the conglom’s focus came earlier this year with the spinoff of the Time Inc. publications division.
Wednesday’s presentations by Bewkes and the heads of Warner Bros., HBO and Turner were all about wooing the Wall Street analyst community and reinforcing the “we’re better on our own” message with financial stats and insights into longterm strategy for what Bewkes called “core operating businesses that naturally belong together.”
Bewkes said the company was poised to reach $6 per share in adjusted earnings by 2016, and $8 per share in adjusted earnings by 2018. Fox’s advance on Time Warner was driven by the appetite to bulk up cable programming assets and production assets. But Bewkes assured investors that Time Warner has plenty of scale and is better off focusing on organic growth from within.
Bewkes asserted that Time Warner has enjoyed a compound annual growth rate in earnings of 25% during the past five years — far outpacing its media peers.
“We have a unique combination of global scale and at the same time an intense focus on leading video content,” Bewkes said. “I’m extremely confident that we have more than sufficient scale to compete” on a global basis, he added.
Although TW’s collection of cablers is smaller than such peers as Fox or NBCUniversal, Bewkes noted that the MVPDs, feeling the pressure from lower-cost over-the-top providers, are starting to balk at such channel tonnage. TW’s focus is on “a smaller group of networks that will deliver real value” and are must-carry channels for MVPDs. No matter what happens with subscription TV distribution marketplace, “our networks will be in that bundle,” he said.
With the spinoffs of Time Warner Cable, AOL and most recently Time Inc., Time Warner is able to deploy more resources into the core business of content production and distribution. In 2013, the conglom in total invested an eye-popping $13.8 billion on content — from programming for the cablers to production and marketing expenses at Warner Bros., he said. Since 2009, Time Warner has plowed some $75 billion into investing in content, he added.
“We’ve never been in a better position from a content position,” Bewkes said.
Bewkes emphasized that the company is pursuing a four-pronged strategy to grow the three divisions: investing in content, harnessing new technologies, expanding internationally and drilling down on operating efficiencies. Technology in particular is opening new vistas for the company — the focus is on tapping technology “to drive usage and improve our economics.” Bewkes indicated that Time Warner units are ready to make some disruptive moves.
“We’re investing both inside and outside the traditional (media) eco-system,” he said. “You’re going to hear that today from all of our divisions.”
Bewkes cited the new opportunities afforded HBO by the success of its broadband offering, HBO Go, which Bewkes called “the gold standard” of authenticated TV offerings.
Among other points Bewkes made:
- He sought to downplay concerns about softness in the advertising market and its impact on Turner nets. He said the slowdown in upfront sales this summer was less of a sign of a pullback by advertisers on traditional TV but rather a desire to shift dollars to the scatter market, to give marketers more control.
- He was blunt about blaming the “majority” of ratings declines across the TV biz on “measurement challenges.”
- He didn’t say much about the feature side of Warner Bros. other than to affirm “the health of the theatrical business” and note that global franchises such as “The Lego Movie,” DC Comics vehicles and the “Harry Potter” canon are only increasing in value.
- He indicated that the J.J. Abrams-produced adaptation of “Westworld” would soon be ordered to series at HBO. He mentioned the project as an example of HBO working more closely with Warner Bros. TV. HBO this summer bowed its first WBTV-produced series in Damon Lindelof’s “The Leftovers,” which has been renewed for a sophomore season.