A day after Ad Age ran an item about Time Warner President and COO Jeff Bewkes expressing his thoughts that online video is overhyped and the focus should be on cable VOD, a WSJ article has speculation that the company is considering a significant reduction of its cable holdings. The article cites unnamed “senior executives” as arguing that the company needs to take better advantage of online video as it rises, suggesting that the company should ramp up efforts in that area by acquiring a major internet company similar to the News Corp. acquisition of MySpace or Google’s purchase of YouTube. Incidentally, last month, News Corp. shareholders voted to approve that media company’s sale of its stake in DirecTV to Liberty Media. The article comes on the same day that its AOL unit will offer up its “First Look” upfront programming presentation for advertisers.
The debate is set to formally take place next month at a board meeting as part of a strategic annual review. The suggestion among these executives is not that TW completely divorce itself from its Time Warner Cable unit, of which it has an 84 percent stake in. TWC, the nation’s number two cable company, recently became a public company in its own right. In any case, the article notes some of the drawbacks to breaking off its cable business:
–TW would have to rely on slow-growing content businesses of film, TV and print.
–After reducing its stake in TWC already, it can’t shrink its ownership further without being saddled with a big tax bill until 1Q08 at the earliest, when the most onerous tax penalties expire.
–While a reduction its cable TV exposure would free up resources for more investment in AOL, which has shown recent promise after years as a revenue drag, but it still remains a distant third behind Google in online advertising.
The debate reflects the uncertainty among executives and shareholders regarding the direction of the company after TW CEO Richard Parsons, who is considered strongly in favor of maintaining cable holdings, retires. He is expected to step down when his contract expires in May 2008 and Bewkes is considered to be next in line for the CEO post.