Time Warner CEO Bewkes' love-hate relationship with Netflix

Jim O'Neill

I think Time Warner chief Jeff Bewkes has a serious crush on Netflix, an obsessive, gotta-have-it, I-can't-stand-to-be-without-it kind of crush that usually manifests itself in teens who are discovering--WOW! I HAVE HORMONES!--a desire that is in fact the hottest of all flames. You can also see it in middle-aged men driving around in small red convertibles that scream "I used to have hormones, now all I have is this little, red car."

Sadly, it's unrequited, and it's turning ugly.

Bewkes, after all, is watching that young whipper-snapper Netflix get all the attention, attention Time Warner used to get when it was a rising star, and before it had to drive around in its own little red car.

Netflix is making headlines every week (in the past week: a new content deal with Disney with early streaming dates for TV episodes; and, a new content deal for its Canadian customers with a day-after-broadcast component from CBC), and adding subscribers by the bus load. Time Warner's HBO is bleeding subscribers like a hemophiliac at a vampire convention and Bewkes' own projections are for 1.5 million customers to pull the plug on HBO this year, a service that once defined pay TV. The cable industry itself is on track to lose more subscribers in the Q4, potentially dragging pay-TV industry-wide subscriber numbers down for a record three consecutive quarters.

While Netflix's market capitalization is less than one-third that of Time Warner's, the sense is that it will continue to grow from its current $9.8 billion to pressure TW's $35.3 billion; maybe not overnight, but it will continue to grow and continue to make Bewkes and the rest of the pay-TV industry uncomfortable.

In a New York Times article Sunday, Bewkes dismissed the Netflix threat to the pay-TV industry, saying, "It's a little bit like, is the Albanian army going to take over the world? I don't think so."

He also promised to ramp up prices to Netflix in future negotiations.

But, while he beats the drum in a furious effort to rouse the pay-TV industry and content providers against it, Netflix continues to push forward, as evidenced by its recent Canadian deal.

Netflix CEO Reed Hastings doesn't appear to be phased by Bewkes, saying the company could "live without" Starz if it had to, but implied he didn't believe that would happen: "They have content, we have money," he said. "Unless we're idiots we ought to be able to find some way to make it work over the next couple years."

What Time Warner, and the rest of the industry have to be more worried about, is Netflix's desire to offer more TV content, perhaps looking at movies as eventually becoming second fiddle.

Both its Disney and CBC deal are more focused on TV fare, after all. Add a couple of live cable channels, cut a deal for some major sports, like the NFL, and Netflix becomes a company that looks even better than it does today. Now that's a little red convertible I'd like to drive. -Jim