At his first earnings call as CEO, Jeff Bewkes said Time Warner (NYSE: TWX) Cable’s fate would be determined by today and, sure enough, the announcement that TWC would be spun off completely came this morning. Bewkes kicked off the 1Q call by noting that the promise was kept and telling analysts and investors that TWX and TWC are close to an agreement on how the spin-off will be handled.
Time Inc.: Publishing was the one area affected by the economy, Bewkes said, but he pointed to online’s performance as a highlight with online ad rev growing fast enough to offset print losses.
AOL: Bewkes started by stressing that he thinks the strategy to switch to ad-supported is on track and highlighting what he thinks is going right — the third-party network and AOL’s traffic gains with content vertical page views up 22 percent and a top-three rank in uniques. Despite gains, third-party network revenue continues to be affected by a change in its relationship with major customer Apollo (For the quarter, that income for Advertising.com dropped to $17 million from $56 million.) But Bewkes also was blunt about the flaws: “We were not satisfied with the performance of display advertising on our owned-and-operated network. … We didn’t integrate Platform-A fast enough .. and that led to sales-channel conflict.” Both he and CFO John Martin said the recent management change in sales and other moves are already having an impact and they expect it to improve.
AOL’s access business: AOL lost more than 600,000 subs last quarter but churn was lower than expected, Martin said, and it lost fewer that in the last quarter. AOL has 8.7 million access subs.
Q&A: Not surprising, the first questions are about AOL display ad sales and Bebo. Asked to explain the reference to sales channel conflicts, Bewkes said the process of integrating Tacoda and Quigo and the multiple sales forces led to not being able to optimize the o-and-o network. As to whether the miss was price or volume, Bewkes said, “we missed some opportunities on pricing.”
Bebo: Asked why AOL is buying Bebo at a time when there’s concern about making money from social networking, Bewkes said the acquisitions before Bebo were about improving monetization. “With Bebo, we gain the opportunity to also grow usage.” The subject came up again with a question about how involved corporate management was in the acquisition: Bewkes: “Did I approve acquiring Bebo? Yes.” The board also approved the deal. No details on what TWX expects from Bebo, which has yet to close, but Martin said analysts “should assume it’s not material to the company’s numbers — revenue, profitability.” (That doesn’t mean it’s not material to AOL proper.)
Acquisitions: Time Warner has money to spend on the right acquisitions but don’t expect something startling (like today’s report that United Online has acquired FTD). Bewkes: “What we would do in acquisitions … is look at horizontal opportunities to increase competitive advantage (with brands, scale and an operating management). You won’t see us doing any transformative or kind of odd and philosophical vertical acquisitions. We would be looking only at horizontal things that we really knew we could execute and add to what we currently do.”
Splitting AOL into audience and access: The split of AOL into an audience and access business continues. If you separate the declining access business from the numbers, Bewkes contends you get a clearer view.