The digital revolution means TV taking over the internet rather than the other way around, according to Jeff Bewkes, chairman and CEO, Time Warner, speaking on the opening panel session at the FT Digital Media conference in London this morning.
Bewkes said that the main change he saw happening was that consumption of TV was moving to on-demand. But the basic subscription business model is likely to prove resilient, he said.
“Video-on-demand is the revolution and it’s happening now,” Bewkes told attendees. “Mobile phones are no different than TVs,” said Bewkes, adding that what the world would see was “TV disintermediating the internet, taking over the internet, not the other way round”.
Bewkes said that the amount and quality of TV production was increasing. “We all have to realise there is no distincition between TV and digital media. All TV is basically digital,” he said.
Bewkes said that the amount of time people are spending and their engagement with video is “going up”.
“The engagment made possible by having [TV] on-demand makes it more valuable,” he said.
Bewkes said it was important to stress that the subscription support for content was a vital part of ensuring that content continued to be of high quality.
Whereas prior to the subscription model developing the quality of content in the US had been relatively low, the development of the subscription model had enabled a wave of fresh programming “freed from advertising”, he said.
Bewkes said that Time Warner was seeing strongest growth in VOD, especially overseas. He said that some of the “highest growth we have is in syndication of stuff we’ve aired going overseas into video-on-demand”.
One issue faced by large media companies, at least in the US, is that migrating to VOD meant they would not initially and immediately be able to address the entire population of TV homes with their content, said Bewkes, pointing out that in the US over 90% of homes subscribed to pay TV services.
Bewkes said that TV continues to account for “80% of Time-Warner’s business.
Bewkes said that what people were increasingly doing on mobile and online platforms was consuming traditional high-production value content.
Bewkes said online video from providers such as Netflix and Lovefilm would become significantly more important in the future.
However, he said that subscription businesses in the US reaching the 20-million plus subscriber level would find it more difficult to made new additions. HBO had 110 million subscribers worldwide, he said. It could charge higher subscription rates and devote bigger budgets to programme making than online rivals. He said HBO has invested in high-value series, all of which were now available on VOD, while Netflix mostly comprised library product.
Bewkes said that the acquisition of digital companies by traditional media players had to be considered on its merits.
“When any company buys an outside thing you have to pay a premium. Is it worth the risk? Does it have a return?” he said.
Bewkes said Time Warner’s disaster merger with AOL merger had been based on “a bad theory” and had been executed at the height of the dotcom bubble. “You can’t do it that way,” he said.