By Steven Zeitchik and Georg Szalai - Analysis
NEW YORK (Hollywood Reporter) -
The departure of Carolyn
Strauss, a longtime HBO executive and its current programming
chief, is the latest indicator that Time Warner's entertainment
divisions are in flux.
Since Jeff Bewkes took over as CEO, the company has folded
a movie studio, set about re-creating its specialty film
operations and may soon examine its already arms-length
relationship with the CW and broadcast television in general.
At the same time, Time Warner has made significant
investments in nonentertainment entities, last week spending
$850 million for a social networking site, Bebo, with little
potential to complement its film and television industries.
The moves are part of a larger rethink at Time Warner that
entails closer scrutiny of its entertainment assets. While
Bewkes has focused on pet Wall Street topics including the
potential spinoffs or sales of AOL and Time Warner Cable, he's
also given strong indications of his approach to entertainment.
One of the clear signals was the recent de facto absorption
of the New Line studio into Warner Bros., to avoid overlapping
businesses within the conglomerate. "The New Line move was pure
Bewkes," one media executive said.
Bewkes acknowledged that philosophy when he told the Bear
Stearns media conference last week that "it is far more
profitable to put (movies) through one theatrical distribution
system."
The likely merger between niche Picturehouse and Warner
Independent fits that same philosophy. It's a mind-set that
also gives rise to speculation about the future of HBO Films,
for years an autonomous film-production entity that already is
easing out of the theatrical business. (HBO said it expects no
near-term change at HBO Films.)
And then there is the CW. The network, which already is run
day-to-day by CBS, has suffered in the ratings as new series
have foundered and returning shows like "Beauty & the Geek"
have failed to pull in viewers.
CUTTING THE BROADCAST CORD?
Time Warner has a history of selling off stakes in
networks, as it did in 2005 with Comedy Central. A
cost-conscious Bewkes could well consider severing the
company's only relationship with a broadcast net as he examines
the conglomerate's television operations. Bewkes also is known
for favoring cable networks, which have over the past decade
yielded higher growth rates on revenue and audience.
While insiders agree that the Strauss move was made by
toppers Richard Plepler and Bill Nelson for HBO-specific
reasons, it was hard to mistake the Bewkes connection. Plepler
and Nelson worked closely with the CEO when he ran HBO from
1995 to 2002, and the move likely was sanctioned, if not
inspired by, the new leadership in the executive suite.
The rationale for the changes at the pay net's
original-series divisions goes beyond programming and buzz to
the kind of hard-core business concerns that resonate with
Bewkes. While HBO continues to be the $1 billion-plus
moneymaking machine, a large percentage of that comes from home
video, which flows directly from the popularity of on-air
series.
"You have to question whether HBO can grow significantly
from where they are," media analyst Harold Vogel said. "Basic
subscriber growth is limited. It costs more to produce films
and series. These businesses aren't in shock, but they are
encountering a rough patch."
On Monday, even Viacom's pay cabler Starz, long an also-ran
in the premium channel derby, took advantage of the Strauss
news to crow about how it finished higher than HBO in household
ratings in February, the first time in years that the Time
Warner net hasn't finished on top.
Time Warner's focus on entertainment comes at an opportune
time as entertainment has been a decreasing part of Time
Warner's financial portrait. The total revenue from
entertainment units has ticked down by about 1 percent each of
the past four years. More notably, the percentage of operating
profit from those units has dropped precipitously, from a
whopping 80 percent four years ago to 44 percent in 2007.
While some of those numbers are the result of restored
health in other businesses, they also signal that a company
with deep entertainment roots doesn't rely on the sector as it
once did. Bewkes, apparently, is trying to change that.
Reuters/Hollywood Reporter
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