EXHILARATING’’

alone channel. That’s a breakthrough
that amounts to Time Warner leading the
charge in offering consumers à la carte
cable. (Showtime and Starz followed HBO’s
lead within months.)
Bewkes and HBO chairman/CEO Richard
Plepler have told Wall Street that HBO Now
will be transformative. With just under
1 million subscribers to date, the streaming
service’s growth trajectory is on target,
Bewkes says (although he would not confirm
that number). “It’s doing pretty much
exactly what we wanted. It’s delivering the
right sub numbers, the right viewing, and
the right retention numbers.”
HBO Now is also a cudgel that Time
Warner is holding over the head of Big
Cable to get operators to work harder to
sell HBO to their subscriber bases. The premium
network’s wholesale model incentivizes
operators to sell subscriptions, giving
them a slice of the monthly fee paid by
every new subscriber.
But Time Warner is convinced that HBO
has room to grow in homes with traditional
cable service if only operators are
more aggressive in marketing the service.
Time Warner Cable, HBO’s former corporate
sibling, is seen as the biggest offender.
Bewkes points to the fact that HBO’s penetration
within Comcast’s cable footprint
is nearly twice as high as in TW Cable’s.
(There’s hope that will improve now that
Charter has swallowed up TW Cable.)
So Bewkes has a message for cable
operators: “Last call.” As HBO ramps up its
consumer marketing for HBO Now, cable
operators have a final chance to step up
the marketing of traditional HBO or partner
on selling HBO Now — or stand back
and watch the premium network sign up
new subscribers in which MVPDs get no cut
of the monthly $15 check.
“For the operator who has been sitting
on his hands, we’re saying, ‘You’ve got two
choices here: Either a house gets HBO Now,
or gets it from you. If you don’t do it, we’re
doing it.’” he says.
Bewkes believes the leverage is working.
In the 18 months since HBO Now was
3,000
2,500
2,000
1,500
1,000
500
0
CHASING DISNEY
Adjusted EBITDA by studio (in millions)
unveiled, the channel overall has added
2.7 million subscribers, its biggest growth
spurt in 30 years. And more of them came
from traditional cable than from Now.
The HBO Now experience has reinforced
Bewkes’ view that Time Warner’s focus on
content production and distribution —
particularly TV content — is the right one.
“There has never been more interest or
vibrancy in television and the relationship
that audiences have to it,” Bewkes says. “It
really is the Golden Age.”
The exec is equally certain that now is
not the time to court a deal with a Facebook
or an Apple or a Verizon. Time Warner
went the online-partner route once
before, and it played like a disaster movie.
STANDING IN AN EMPTY ROW of seats at the
Theater at Madison Square Garden after
Turner’s nearly two-hour upfront presentation
on May 18, Bewkes is gamely talking
shop with a reporter. As workers sweep up
confetti, strike the stage, and pack up heavy
equipment all around him, Time Warner’s
titan sticks around to articulate the central
challenge that media giants face in this
fraught moment of change.
TV programming is more plentiful, more
beloved, and more “at your service” on
multiple platforms, as he puts it, than ever
before. That’s good news for Time Warner,
because demand is only going up. But the
economic fundamentals of how all that
programming is paid for are very much
in flux, leading to nervousness in the executive
suites and bearishness on Wall Street.
In Bewkes’ view, all of this quaking and
shaking will sort itself out. “Great content,”
he says with characteristically patrician
delivery, “will carry the day.”
But as seismic changes whirl around
him, Bewkes will face plenty of challenges
in his steering of the Time Warner ship. It
begs the question about a Plan B. Is he biding
his time until the right offer comes in?
Is he hoping to outmaneuver his rivals? Is
he in denial? For now, it’s a cliffhanger
worthy of “Game of Thrones.”
2013 2014 2015 2016 (estimated) 2017 (estimated)
DISNEY WARNER BROS. 20TH CENTURY FOX LIONSGATE PARAMOUNT
SOURCE: COMPANY REPORTS, RBC CAPITAL MARKETS ESTIMATES
TW STATUS REPORT
Time Warner chairman/CEO Jeff Bewkes has been
crystal-clear about his priorities: Embrace new forms
of distribution, double down on content production,
and expand internationally. He also places a focus on
finding operating efficiencies — aka cost-cutting —
and on collaboration among HBO, Turner, and Warner
Bros. “The company is operating together better than
it did five years ago,” says a Time Warner alum. Here’s
a look at TW’s core divisions. —Cynthia Littleton
HBO
The Good
• HBO is poised for renegotiations of MVPD affiliation
deals that could add momentum to its subscriber
growth. It’s also targetting broadband-only homes
with HBO Now.
• It’s adding dimension with new shows from
Jon Stewart, Bill Simmons, and Vice Media. A deal
for “Sesame Street” aims to keeps HBO relevant
with families.
• It has the goods over its premium rivals, including
Netflix, when it comes to movies, with output deals
with Warner Bros., Fox, Universal, and Summit.
• It’s pursuing a mix of OTT, linear, and licensing
options to grow its international footprint.
The Bad
• HBO faces fierce competition for talent and market
share from a wider array of rivals than ever before.
• Mergers among distributors, including Charter-Time
Warner Cable and AT&T-DirecTV, could mean more
expensive carriage terms.
• With the end of “Game of Thrones” in sight, the
network is thin on buzzy scripted hits.
TURNER
The Good
• TW has doubled the budgets for original programming
at TBS and TNT.
• TW says Turner will deliver double-digit affiliate fee
growth in the next few years, thanks to increases
baked into existing contracts.
• Bleacher Report has blossomed into the No. 2 digital
sports site, behind ESPN, since its 2012 acquisition
by Turner.
• The digital and mobile operations of CNN Digital are
growing at a fast clip, outpacing U.S. news rivals.
The Bad
• Cord-cutting will exact a toll.
• TBS and TNT lean on pricey sports rights — for the
NBA, Major League Baseball postseason, and NCAA
tournament — to drive affiliate rate increases.
• TBS has been reliant on “The Big Bang Theory”
reruns to keep it the No. 1 cabler in adults 18-49. In
syndication since 2011, the show will undoubtedly
cool off.
WARNER BROS. ENTERTAINMENT
The Good
• Warner is seeding international growth prospects
with recent investments in China and Europe.
• The success of NBC’s “Little Big Shots” shows the
worth of WB’s investment in unscripted production.
• The video-game unit continues to be strong.
• Bewkes predicts that the window between theatrical
release and in-home VOD options will continue to
shrink. These film exhibition shifts benefit studios.
• A free agent, Warner Bros. TV has an edge over its
vertically integrated studio rivals.
The Bad
• Warner Bros. TV is facing more pressure to hand
over rights and profit stakes to network partners as
a condition of getting shows on the air.
• Content licensing is booming, but syndication is
dropping as platforms diversify.
• Warner Bros. has had a prolonged bad run at the
box office and is tweaking its plans for the release
of 10 DC Comics-inspired titles after the poor critical
response to “Batman v Superman: Dawn of
Justice.”
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