Time Warner CEO Is Talking $#!% About Netflix

Who isn’t scared of Netflix? Jeffrey L. Bewkes, the chief executive of Time Warner, that’s who. The NYT says that although Netflix has been a successful business partner to the major studios for the past few years — the deals are expiring and they won’t get such an easy ride next time.

“It’s a little bit like, is the Albanian army going to take over the world?” said Jeffrey L. Bewkes, the chief executive of Time Warner, in an interview last week. “I don’t think so.”

The Times says the bravado stems from the fact that the Netflix/Starz streaming deal is expiring. It was a great deal for Netflix, but for Disney and Sony, the studios behind Starz, it’s considered “probably one of the dumbest deals ever,” by the media analyst quoted in the Times.

Here’s the NYT’s recap of the CEO’s comments:

Mr. Bewkes said that deal, which gave Netflix significant momentum into the new world of online video, potentially undermined the business model of cable television, based on the subscription fees that have steadily flowed even as other media businesses have suffered in the digital age. “Why should anyone subscribe to Starz when they can basically get the whole thing for about nothing?” he said. “That doesn’t make much sense.”

Mr. Bewkes explained that in the late 1990s the media industry embraced Netflix as a new distribution outlet for renting DVDs — without foreseeing that the company would eventually accelerate the decline in the sales of DVDs, which for years had been the lifeblood of the film industry. Now, with its success online, Netflix has raised fears that consumers may stop paying for cable television — the much-debated phenomenon of cord-cutting.

Time Warner Views Netflix as a Fading Star [NYT]

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  1. Shadowfire says:

    Awwwww… Is da poor wittwe cabwe man scared of the big bad internet? There there my delicate little snow flake, everything will be ok.

    • PSUSkier says:

      The catch is the cable man is also a movie studio who owns a boatload of content. This sounds a lot like a negotiations primer for higher pricing to Netflix because he just realized he’s hurting his cable business by throwing content at Netflix under the current contract.

      • shthar says:

        Especially after they start their own streaming website. .99 cents a movie or 8.99 a month for ALL Time Warner content, which you now can’t stream on netflix.

      • ARP says:

        This. Given the monpoly power of the content owners, my guess is that they’ll probably either kill Netflix (or scale it back) or force them to charge such high prices, that’s it will be on par with….you guesssed, it, buying cable. Either way, the consumer loses and a dinosaur media company can continue not to innovate, not to improve its services, and keep competition supressed.

        • pawnblue says:

          The monopoly is the problem. Content creators, broadcasters, publishers, transmitters, and everyone else should all be separated.

          Could you imagine how well content could be transferred if the creators and distributors were different groups? Suddenly you put your content on hulu and netflix to maximize your returns.

          As is, you have Al Franken as the only congressman who sems to even care. And he only cares because he saw the negative effects of deregulation in this industry.

        • sonneillon says:

          Well they may hinder Netflix online distribution model, but their rental model is going to stay. Although they can be hindered by having to buy their rental videos from a different source, like Redbox has been doing.

  2. BacteriaEP says:

    Honestly, the studios can handicap Netflix all they want. It’s their own content and they can decide how to use it. But, at this stage in my life, the cord has been cut. I’m free from cable and I’ve found since ditching it altogether that using Netflix and Hulu has drastically changed my viewing habits to the point where I just don’t see the need in cable at all, with or without Netflix and Hulu.

    • crazydavythe1st says:

      Amen. I did a 30 day trial of cable once and it was pure shit. HD channels were a pixelated mess, every other channel played reruns of old TGIF shows or infomercials, and the price was ridiculous. Never again. I’ll just have to become more cultured if the studios cut off Hulu and Netflix.

    • coffeeculture says:

      Amen +1, I’ve calculated that I’ve saved at least $600 in 2010 from cutting cable. Netflix + random purchases on iTunes come to about $200 a year. Considering the Hulu premium service, even then…$300 is real dough!

      The only reason I’d go back to cable/satellite is to buy the fat DirecTV football season pass thing, even that…it looks like I can get it online.

      • sth9669 says:

        Be careful, the online stream of NFL Sunday Ticket is awful. Unless you plan on watching it on your laptop, it’s almost unwatchable (and I have 25 mb Fios, so it’s not my internet connection). Also, for some reason, it seems like the stream always freezes right as the QB is going to snap the ball coincidentally, so the screen stays frozen but you can hear the audio of the play, and then it jumps forward 12 seconds and maybe you get to see the replay.

        Personally I’d rather not watch the game than have to deal with that piece of crap. . .

        • Nigerian prince looking for business partner says:

          I also cut the cord about a year and a half ago. I just watch football OTA or for games on ESPN, I’ll just walk to our corner bar and watch the game there and spend the money I’m saving on food and beer.

  3. zegota says:

    The Netflix/Starz deal does kind of confuse me, honestly. I’m not sure what Starz gets out of that, unless Netflix is seriously paying them a lot of money.

    • DanRydell says:

      Apparently they were only paying $25 million per year, which is not a lot of money.

      It introduced me to Party Down, but they cancelled that show (and I can’t blame them if the finale was viewed by fewer than 100,000 people)

    • fatediesel says:

      Netflix is paying Starz $25 million per year, which makes no sense for Starz that is spending hundreds of millions for content. That’s why most people believe if the deal is renewed it will cost many times more than the current deal.

      • FrugalFreak says:

        At the time of the partnership, I think Starz was building itself up, where would it have been without the Netflix partnership?

      • thedarkerside.to says:

        Netflix isn’t asking for exclusivity though nor is it their only outlet.

        The problem is that most producers have a certain margin in mind which usually revolves around the idea of putthing physical media into someone’s hands. Clearly that time has passed (or is about to).

        If the content industry thinks they can be greedy they’d be very surprised very soon.

    • jesusofcool says:

      I should have seen this coming. When your business model is dependent on your competitors giving you a good deal to access their content (and subsequently undermine them), you may be in trouble.
      On some levels, I guess it’s surprising Netflix lasted this long without serious push back.

  4. jesdynf says:

    What’s that, Time Warner? You want to tell me about internet winners and losers?

    You want to tell me about who won in America? Online?

    … no, I didn’t think you did.

  5. GuJiaXian says:

    I only have cable because it comes bundled with my internet (oddly, internet access is more expensive without bundled cable than with). That said, my wife and I use Netflix *constantly*.

    • Ubernostrom says:

      I have the same problem. A majority of my television usage these days is netflix, or xbox. I only really ever watch cooking shows on cable anymore.

    • Nigerian prince looking for business partner says:

      When I got rid of cable TV, I also had to pay more for internet but I still came out ahead for some nominal amount ($5 or $10) each month when taxes and various surcharges were factored in.

  6. Beave says:

    Cable sucks. When my DirecTV contract runs out I’m probably done with them too. For the price of a Tivo subscription or possibly free with a PC hooked up to the TV and a TV tuner attached I can record the network shows I want. $20-25/mo for Netflix and Hulu fill most of the gaps.

  7. CherieBerry says:

    Canceled our cable, purchased an antenna for local channels, and use the AppleTV for Netflix and movie/tv rentals.

    The antenna brought us this great FREE music channel called COOL TV, which I really enjoy. Nonstop music videos. What a novel concept.

  8. billbillbillbill says:

    I so want to cut the cable but as a sports fan, there are just not enough options to see live games. So for the foreseeable future, I am stuck.

    • coffeeculture says:

      Yeah…this is my dilemma. I’ve had to do without, but I would justify it in the future by saying that attending such games (tickets, parking, food, drive time, beer) are FAR more expensive than having a nice set-up at home w/ premium sports networks and my own food/friends.

    • Kestris says:

      Yup, one of the main reasons we keep it too.

    • kewpie says:

      That’s our problem, too. We never watch anything on tv anymore besides sports. Everything else is through Netflix and Hulu. I’d love to get rid of the cable, but there are currently no good options for watching football and/or hockey without it.

  9. Cleo256 says:

    Ah, Captialsim. A wonderful system where consumer choice dictates the products offered.

    Unless, of course, giant media companies find it inconvenient, or slightly less profitable. Then they’ll force consumers to do it the way that makes the most money instead of trying to make money the way the consumers want.

    See also: the vending machine that couldn’t keep 12oz cans in stock while the more expensive 20oz bottles languished, so they simply stopped offering 12oz cans.

    • DanRydell says:

      You seem to think that you’re arguing in favor of a free market, but apparently you think that consumers dictate everything in a free market? That’s not how a free market works. You are seeing the free market at work here. If the deals with Netflix were disadvantageous to the movie studios, then changing the terms when the deal expires is exactly what any rational person would do in their position.

      Reacting to customer desires is obviously something that companies need to do in a free market, but you can’t expect them to grant your wishes if it costs them money. The problem with streaming is that customers are willing to pay so little for it. If you pay $15 a month for Netflix, you can imagine how little ends up getting back to the content producers compared to purchasing a $15 DVD.

      The only reason they’re willing to allow streaming at all at such low prices is because people have made it clear that if they can’t have what they want for damn near free, they’ll just take it for free. Piracy is a force that doesn’t belong in a free market, but it has manipulated the market in the consumer’s favor. It has given people like you the idea that it is the right of the consumer to dictate how and what others must sell their product, and if the consumer doesn’t get their way they just take what they want. In a free market the consumer would react by finding an alternate LEGITIMATE source for what they want, or in the case of a luxury item they could do without. That is how consumers exert force on a free market.

      • jake.valentine says:

        While I do not disagree with the gist of your comment, there is something that it seems the media corporations are unaware of……… Consumers who will never, ever be paid anything remotely even close to what people in the media food chain make are unlikely to be sympathetic to lost revenue. For example, if some regular guy/gal in the midwest is struggling on $40k a year to support their family, why would they be overly concerned with reducing the income of people in LA making over $100k a year, perhaps millions a year?!? On a personal level, my humble opinion is that we have a larger disconnect among us in regards to compensation than most people realize. Media is only 1 area of our lives that this affects. I am very fortunate to earn just shy of $100k a year and live America’s Finest city: San Diego, but I have dozens of family members on the east coast who struggle everyday to pay the bills. They are not the least bit concerned about some person being paid a high salary who has to take a bit of a hit. Again, I do agree with your comment. Just adding something else to consider…….

      • alulim says:

        “Piracy is a force that doesn’t belong in a free market..”

        I think you’re definition of “free market” is a little skewed also. Piracy and counterfeiting exist in every market for every good/service profitable. Far from an evil, they actively help set the market price. Cigarettes are smuggled into New York even though to get there you pass through PA and NJ. Taxes, especially in NYC, are higher meaning they can sell their “illicit” product for more. Generally, from a public policy perspective the total cost (excise/sales taxes included) should be set accordingly.

        Granted digital media is different and much more complex but some of the same principles apply. I love hulu, there is only one show I regularly watch on cable. The “content providers” bought in/signed on only because it was the lesser of two compared to piracy. That was directly driven by the CONSUMER acting via piracy.

      • FrugalFreak says:

        We might have alternative without government franchising the cable operators that decided they wanted to become gatekeepers to lock control and keep out compeitors that could deliver media streaming that competes with paid broadcasting.

        Big media can’t force feed cake and eat it too, people will just eat fudge.

      • peebozi says:

        Why shouldn’t piracy be a part of the free market? BTW – The US does not operate in a free market.

  10. whittygirl says:

    We stopped cable TV (via directv) as well when we moved and watch netflix streaming over the xbox. It’s nice having so much more control over what our young kids see–no more worrying about commercial or other unexpected content. The one thing we miss is football, so we’ll be trying to figure that out next season. I just don’t find TV that interesting anymore.

  11. jheyneman says:

    I already don’t pay for cable TV. What’s funny is that I use my Time Warner internet to watch Netflix, vudu, and the occasional bittorrent download. As soon as they offer a la carte, I’ll be on board in a heartbeat.

  12. Bativac says:

    I’d cancel cable in a heartbeat if Comcast wasn’t also the only local Broadband provider. I need my high-speed internet.

    Without TV I think I’d save twenty bucks a month, maybe thirty. Which I don’t mind paying for the occasional cool old movie on TCM. Does anybody if Netflix has a good selection of pre-1960 movies?

    • chuckreis says:

      Netflix has a fairly broad selection on watch it now.

      They have a lot of older movies in the listing (I have the restored version of Metropolis in my queue now).

    • Kingsley says:

      I’m sure that your taste is different from mine, but TCM was the only channel I was paying cable-tv for, so we have that in common.

      Yes, there are tons of old movies and they are adding to streaming versions all the time. I’m seeing many the old foreign films I’ve wanted to see in my life. I have their lowest plan, and I get DVDs if they don’t have a streaming version. My queue is full of 500 classic or eccentric titles. I use the cheapest Roku box.

    • Nigerian prince looking for business partner says:

      For that $20 or $30/month, you could pay for a 3-at-a-time DVD plan with Netflix and have a huge catalog of old movies.

    • HogwartsProfessor says:

      They just added a CRAP TON of old movies on streaming. No B horror flicks, though. They really need to get those on there. I miss TCM because of those. :(

    • Dr.Wang says:

      yes, lots of films from the ’40’s and earlier.

  13. raydee wandered off on a tangent and got lost says:

    If I could order the cable channels that I want, À la carte, without having to deal with a “basic package” of stuff I don’t want … I would totally do it. I never saw the point of getting a cable or satellite TV deal of the “Thousands of channels you’ll never actually watch” variety. How about a more sensible “The dozen channels you watch all the time” option?

  14. Kingsley says:

    What a great article. I’m laughing inside.

    Clowns like this were/are satisfied with the cable-tv business model of bundling tons of channels so that viewers can get the few that they actually watched. Even though bundling has been the top complaint about cable-tv for 20+ years. Well people are able to get gadgets like Roku now that are extremely simple, and the viewer is really in charge.

    Kudos to Netflix for spearheading new business models and technology in their delivery systems, and especially for being ultra-responsive to their subscribing members. They are doing everything right.

    For example: People are going to be watching TV shows (and movies…) on their mobile devices and the studios need partners to invest in the time and technology to deliver the content. I don’t expect Time-Warner to lay out much cash into delivery infrastructure, so they have to cut deals.

    The person quoted in the article is rewriting history.

  15. benjitek says:

    Viewers are being pushed to alternate sources for viewing, and those sources aren’t the ones the content providers want people using. Many, myself included, are simply priced out of cable television. The rates are ridiculous and legitimate online viewing options are diminishing. Even many Netflix disc rentals are being delayed past release dates so that some studio executives can add a wing onto their mansions. This rental-delay is expected to become even longer in 2011.

    It’ll be interesting to see what new, less-detectable, ways to ‘obtain’ multimedia online develop… The content providers are pissing a lot of clever people off ;)

    • vastrightwing says:

      I see it like this: before the internet, consumer choice was: 1) Over the air, 2) Cable, 3) renting media (VHS/DVD) 4) Theater. Those choices are still there, now you can add 5) User content via YouTube, 6) Subscription on-demand. The content providers were king because they dictated the cost and choice to the consumer. Now, consumers have the choice (as it should be) and this translates to lower revenue to the producers.

      Their next move will be to try and kill NetFlix by making it so expensive to get content their business will fail. But it won’t save their collectives arses because no one wants to pay the rates the content providers want to charge (at least I don’t). I dropped cable long before NetFlix came around simply because the value was not there. If I can’t use NetFlix, I’ll simply make do with free over the air content. That is all.

  16. dolemite says:

    I’m still failing to see the view of these media companies. “Boy, are we pissed that someone is buying our movies up out there and renting them to people that otherwise would never give us the time of day!”

    They act like their dvd sales or cable subscriptions are worse off because of Netflix. I don’t subscribe to movie channels (because I don’t watch 98% of what they show anyhow), and I don’t buy dvds. So…if Netflix wasn’t buying your dvds to rent to me…you’d get ZERO business from me, and people like me.

    • Hobz says:

      BINGO!!! I don’t subscribe to movie channels because I don’t watch half the crap on them. If it weren’t for Netflix I wouldn’t watch their programs at all.

      The problem with cable bundling is that cable companies are enabling crappy programming that would otherwise never get a single viewer the ability to survive.

  17. Blious says:

    Maybe things will get tougher on Netflix in the future but right now, it rocks and I love it. Well worth the money though I hope they continue adding things

  18. dush says:

    It’s not netflix that will make people cut the cord. It’s the quality of cable programming and customer service that will do that.

  19. vastrightwing says:

    Dear Mr. Time Warner. It won’t matter what happens to NetFlix. You (meaning all carriers and the content providers) have forever changed the course of consumers. You want more of our hard-earned money for diluted programming (awful content filled with commercials). So we start cutting the cord. You blame NetFlix but take none of the blame yourself for over charging us for junk. Even if NetFlix suddenly went away, people would not flock back to you. No, there are plenty of other entertainment choices, and that’s the real poison you face. Forget your wishful thinking and enjoy the revenue while you still can. The ride is about to end (for you).

  20. Hi_Hello says:

    time warner? last I heard they merge/bought AOL and was planning on streamming movies through the internet…. did that ever happen?

    even without starz, I’ll keep my netflix. I haven’t had cable in a long long long long time

  21. damageddude says:

    Maybe if the cable companies provided more on demand of in-season shows, or new movies, without raping customers I’d have more sympathy. Content is king — either produce your own programing like HBO or prepare to fade away.

  22. Kestris says:

    We actually have looked into cancelling our cable, as we tend to watch Netflix more these days.

    It might end up being the way to go and save money in the long run.

  23. Rombus says:

    Just a reminder to everyone:
    Time Warner != Time Warner Cable

    They are totally separate companies now, only sharing the Time Warner Name.

  24. Sword_Chucks says:

    Didn’t blockbuster say the exact same thing? Look where they are now, look where Netflix is. The studios can try, but the consumers wont respond the way the studios want. I got freed from cable because of comcast not wanting to provide me service. Im content with broadcast TV.

  25. Torchwood says:

    Sigh…. when did watching television become an exercise in frustration? Lets see here…

    * Turner Classic Movies is able to show movies in their original aspect ratio, but the premium channels embrace pan-and-scan
    * Lets see how much we can over-compress the content.
    * Remembering when the M in MTV meant music, A&E meant “Arts and Entertainment”, and TLC meant “The Learning Channel”
    * SyFy was called SciFi and showed a ton of Science Fiction
    * Perpetually reminding me that I am watching a show on such-and-such a channel, and to stay tuned and watch another show
    * The logo in the corner
    * Paying for sports channels that I don’t watch

    Time to cut the cord.

    • Red Cat Linux says:

      ^ This. The single most annoying invention in advertising is the bottom of the screen animated spot telling me to watch the up and coming whatever. Holy Crap, those things are intrusive. Some of them have sound that interferes with what you are watching, in addition to eating up the bottom of the screen. WTF.

      I can deal with a transparent station identification bug in the corner, but if the animate that thing and give it police crime tape and flashing lights and sirens you might as well have given it a 15 second spot in commercial breaks.

  26. odarkshineo says:

    Whew good thing cable is a legal monopoly and gets to charge me 65.00 a month for the same crappy internet service iv had for 4 years w/o prices going down. I’m going to call that a TWC win.

  27. Red Cat Linux says:

    “Now, with its success online, Netflix has raised fears that consumers may stop paying for cable television — the much-debated phenomenon of cord-cutting. “

    Uhm… too late. Of course, if the Starz streaming agreement is not renewed and the instant queue on Netflix dries up, I’m not going to be a happy camper.

  28. jake.valentine says:

    The tidal wave of people dropping cable and converting their consumption through the internet and digital OTA antennas seems to be taking place now. The cable companies eventually will have to offer affordable options by allowing their customers to choose exactly what channels they wish to receive. I get hundreds of channels and watch about 6 of them. Once the Eagles are eliminated from the playoffs (they always let me down), I will be joining the ranks of people making the switch. Once Time Warner starts calling me with offers to come back, I will tell them to pick a 4 hour window for me to call them back to consider their offer. If the specific person doesn’t pick up after 1 ring they will have to reschedule……

  29. cyr says:

    People subscribe to Starz? Like…on purpose? I’ve had Starz as long as I’ve had cable/dish and I don’t think I’ve ever once paid for it. It’s always been tacked on free as part of some promotion.

    Order HBO? Here! Have a free year of Starz!
    Threaten to cancel service? Have a free year of Starz instead!
    Just called to say “hi?” How sweet! Have a free year of Starz!

    The Starz content on Netflix always seems to have a lower video quality than the rest of the content available anyway. So ultimately, I don’t feel like it’ll be a big loss if that content disappears.

  30. Duckula22 says:

    Or rather…

    “It’s a little bit like, is the Albanian army going to take over the world?” said Jeffrey L. Bewkes, the chief executive of Time Warner, in an interview last week. “I don’t think so. It’s going to be one of the big dogs.”

  31. davidsco says:

    He has that wrong, T/W is a fading star. How’d that AOL deal pan out???

  32. Talisker says:

    I have limited time to watch movies. I have limited time to go to video stores to rent something. I have a one DVD Netflix account. I use Netflix for streaming.

    There are very, very few movies that I’ll go out of my way to see. If there’s nothing that I want to watch on Tivo, or if my wife and I have a blessed two hours to spend watching a movie, then the first thing we’re going to do is see what we have on the instant queue.

    We’ll find something there that we want to see. But I’m not going to go to the video store to rent anything.

    What does this mean for Starz? If you want your movie seen in my house, then you need to stream it somewhere. And odds are I’m not going to see it in the theater – the cost of babysitting on top of $12 a ticket makes it a waste of money.

  33. Spook Man says:

    And this boys and girls is why people like these f’s are fighting net neutrality.. The instant they can’t compete with things like NetFlix and their streams, then people will not want their tv’s and watch everything streamed..

    So what happens, they loose their profits and he doesn’t get his bonuses. So in excellent business sense (which these people don’t have), they continue raising their rates, only to keep their stock holders and board members happy when their profits go up. But in the end, they’re just driving the customers away looking for better, cheaper options.

    So how do they combat this? By one, charging you for the bandwidth you use and two, cut back the allowable bandwidth to netflix servers. #1, they’ve already tried and failed; but it’s still an option. #2, who do you know for certain that this isn’t already occurring, maybe it takes a movie to download an extra 30 seconds or more when it could be done in 1 second.

  34. HogwartsProfessor says:

    Pish. The Starz Play on Netflix is crappy anyway. Also, I get it for free on DirecTV every time I have any changes or complaints. They give me several months for nothing. Talk to them about that, Time Warner, and leave Netflix alone. You’re just jealous because they’re better than you.

  35. yaos says:

    A bloo bloo bloo Netflix is making money.

  36. thebt1 says:

    the studios can try to cripple netflix streaming, but it will just mean that people pirate the content a lot more. i have netflix streaming and love it, but if i can’t find it there, i might check bitorrent. that’s just the way it is, and studios need to realize that.

  37. FrugalFreak says:

    I’d like to see Netflix put a satelite in orbit and unbundle from the Cable content ISP’s they have to rely on. A Netflix delivered TV signal could help boost it’s dominance and end the gatekeepers dominance over them.

  38. thedarkerside.to says:

    Ah yes the content mafia.

    Here’s my bit of advice for them:

    You have two choices: You can take my money via Netflix, or I can take your content via Bittorrent. Your choice really.

    You get a really good deal with Netflix, you give them the data once, then they pay for the delivery to me. *I* pay for the internet access, Netflix access and all the devices I play the content on.

    Advantage? I get what I want, you get money. This works really well.

    Alternative: You think you can force me to buy your product based on prices that do not reflect today’s (technological) reality and end up like the Music Industry.

    Your choice really.

  39. Coyote says:

    Signed up for netflix 3 days ago, not concidering cutting my cable channels entirely but if I were a Starz or even HBO/Showtime subscriber I would have canceled those in an instant.

    So yeah, I can see why he’s scared.

  40. pot_roast says:

    undermined cable? No, Mr Bewkes, it did not. I wouldn’t play for Starz on cable.

    Yet another delusional and greedy cable executive clinging to an outdated business model.

  41. axiomatic says:

    Dear any company providing a service for customers,

    Giving customers exactly what they want at a fair price is a winning enterprise. Stop being jealous of Netflix and emulate them. You would be surprised at the results.

    Trying to figure out new ways to profit off your customers while providing no additional service will always get you called out.