Time Warner Clinging to a Dying Business Model

Time Warner (s TWX) says it is embracing the web through its TV Everywhere initiative and through its plans to make web content from its cable channels available on Google TV, according to a Wall Street Journal article today. The story, titled “Time Warner Sees Ally in Web,” details the company’s digital efforts as it tries to deal with a world that is moving increasingly online and increasingly on demand.

But the premise is flawed.

For one thing, the headline is disingenuous: Time Warner doesn’t see the web as an ally — in fact, CEO Jeff Bewkes specifically calls out web-centric video delivery through Hulu and Netflix (s NFLX) as competition. Time Warner’s “embrace of the web” isn’t in making its content available in a web-friendly fashion; it’s about restricting access to that content through authentication that ties back to consumer’s cable bill.

Make no mistake: Time Warner is building a pay wall for its cable assets online. Its partnership with Google TV and its TV Everywhere initiatives are merely defensive measures designed to keep customers subscribed to its pay TV channels.

But if Time Warner’s plan is to hold back whatever content available on the web, it’s going to be plowed under by the increase in the number of users who simply don’t see the value of paying for TNT, TBS or HBO. It’s not that these users are “cord cutters” necessarily; it’s that this new generation of users never really had the cord to begin with. I’m talking about users who are now graduating or have recently graduated from college and have gotten by just fine by viewing their content through online services. For them, a cable subscription is not a way of life, but an unnecessary expense. If they want to pay for content, there are cheaper alternatives than a $100 cable subscription.

Time Warner will soon find this out the hard way.

The most laughable paragraph, however, is the closer:

Mr. Bewkes said that Hulu and Netflix, which offers a streaming television and movie service, have garnered attention because they have created a great experience for accessing content on smaller screens. But he said that as Google, Apple and paid-television operators improve the experience on large TVs, people will prefer to watch on demand on their TVs.

What Bewkes seems to be missing is that Netflix and Hulu already make their content available on the big screen. Netflix has been doing so for nearly two years, ever since it announced the availability of its streaming service on the Roku Player. And it’s no longer a niche activity — more than 60 percent of Netflix subscribers stream some of its online content, which is now available on close to 100 different consumer electronics devices. Meanwhile, Hulu’s Plus subscription service is just getting started, but it too will be available on a number of connected TVs, Blu-ray players, gaming consoles and mobile devices by early next year.

A lot of Time Warner’s future will depend on its strategy for dealing with distribution of video in the connected world. It can either compete with Netflix and Hulu Plus head on by going to the consumer directly. Or it try to to stem some of the losses by joining them. But putting its video programming behind a pay wall, clinging desperately to the same old cable model, isn’t going to work in tomorrow’s world.

Photo courtesy of Flickr user Alan Bruce.

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