Friday, November 09, 2007

Bewkes: Media Business Models May Change

Bewkes: Media Business Models May Change
By Georg Szalai

NEW YORK -- Time Warner must focus on being "the most profitable, not the biggest" entertainment company, and his team must concentrate on boosting the stock "now," CEO designate Jeffrey Bewkes said here Wednesday in his first public appearance since being tapped for the promotion.

That seemed in line with expectations that he will cut corporate costs and sell off slow-growing properties.

In an appearance at the Media and Money conference, organized by Dow Jones and Hollywood Reporter parent The Nielsen Company, Bewkes wouldn't show his cards on rumored possible asset sales and spin-offs of TW Cable, AOL and Time Inc., but signaled there could indeed be reasons for such moves down the line.

He declined to comment on the possible timing of such moves, saying TW wants to "sneak up" on its competitors more than in the past with strategic moves.

Asked about the current writers strike, Bewkes said it won't have "any material adverse financial impact on us this year." He added he expects to have the labor issue resolved before it can start hurting TW's finances next year.

"We all have respect for them," he said about the writers before calling for a "fair and seasonable solution."

Bewkes also signaled that entertainment business models may change amid technological and international growth.

For example, he said that instead of charging movie-goers $8 or more, companies could charge less in return for a bigger audience. "What if you got only $1 per ticket, but 6 billion (people) see (the film)" for no major extra cost, he said.

Bewkes once famously said that talk of corporate synergies is "bullshit."

On Wednesday, he said there is some synergy, but it's not always so much about money but also talent and other relationships. "Writers and producers come to us first" because TW owns industry-leading TV networks and film operations, he argued.

Bewkes went on to argue that the primary reason to own certain businesses is not synergy, but to run them well and position them as industry leaders.

In his clearest signal to date that he will likely sell or spin off some units, Bewkes also acknowledged that some benefits of having various operations under one conglomerate umbrella "doesn't mean you have to have it the way you have it now.

Asked if he ever considered turning down the CEO position as such jobs seem short-lived and less fun these days, Bewkes replied: "I think it actually is (fun.)" Asked about activist shareholders and other people mingling with his affairs, Bewkes replied those are "just people with more advice."

U.S. no place for private media
By Mimi Turner

NEW YORK -- Private-equity expansion in traditional media will be focused on high-growth and high-risk developing markets rather than the U.S., senior executives said Wednesday.

"Media is what we do, and in the last two years we have not invested in newspapers or radio or cable in the U.S.," said Julie Richardson, managing director of Providence Equity Partners, which was a partner in the acquisition of MGM.

Speaking at the Dow Jones/Nielsen Media and Money conference, Richardson said emerging markets offered higher potential returns.

"One of the things we've found that worked really well is traditional media deals in emerging markets. We are seeing real opportunities in high-risk economies, but ones which also promise high growth," she said, noting Providence's recent investment in Turkish pay TV platform Digiturk.

That investment was going "gangbusters," she said. Providence also has made substantial cable investments in emerging markets in Europe.

Media and Entertainment Holdings chairman and CEO Herbert Granath said the changing economic demographics in territories like Eastern Europe made them promising investment targets.

"The economics of these countries that are either part of the European Union or are going to be part of the EU are on the up," he said, noting that ad spending and per-capita income were attracting global investment.

Granath is vice chairman of Central European media venture CME, which owns commercial-free TV stations in the Czech Republic, Slovakia, Slovenia, Romania and the Ukraine.

Carlyle Group managing director James Attwood said that investment models could translate from country to country.

"It's not just about looking at developing markets; it's taking an understanding of the evolution of business models from one market to another."

Attwood said that in the aftermath of the credit crunch -- which has left several hundred billion dollars of unsyndicated loans on the balance sheets of major investment banks -- private equity deals would be on a more modest scale.

"We will probably see markets come back in the first or second quarter of 2008, but we will see smaller deals priced at lower values," he said.

Attwood added that even when deals came back onto the market, the valuations would more likely be what they had been in 2003-05 than in 2006-07.

"The last two years have really been unique," he said. "Credit costs have been low, and with the banks saying don't worry about covenants, a lot of risk was mispriced and there was a lot of risk-taking that was untraditional in our market.

"That said, media is still a wonderful arena for private equity to invest in," Attwood added.

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