The Tyranny of Free TV: Time-Warner's Jeff Bewkes Does Not Get It

In a series of interviews, Time-Warner's Jeff Bewkes declared TV is entering a new Golden Age, with its influence ever stronger on Western and indeed, global culture. Dismissing threats of cable cord cutting, and technological challenges from Amazon, Netflix, Apple, Google, and others, Bewkes declared that he saw limitless revenue from cable, decrying the "tyranny of free television." In "The Big Short," Michael Lewis portrayed chief executive after chief executive, who knew only vaguely what his company was doing, what risks it took on, for what rewards. This was true of Wall Street giants like Bear Sterns, to legendary insurance firms like AIG, to legendary clueless hedge fund manager Wing Chau, partnering with Merrill Lynch. None had a clue as to the real nature of the business they were dealing with. Jeff Bewkes promises to be Television's most legendary Wing Chau.


Because Time-Warner has the temporary whip hand over Itunes and Netflix, Bewkes assumes that no one can do what he did, go out and create content (as he did with HBO). In the interview at DeadlineHollywoodDaily.com, he said:

Bewkes argued that with TV shows such as Boardwalk Empire, which will come to UK Sky next year, TV is having its 2nd golden age. Partly this is because TV has kept pace with technology, from digital to HD to 3D. “We’re in the midst of a TV renaissance,” Bewkes tub-thumped. Bewkes singled out UK-originated shows such as Shameless, The Office, American Idol and X Factor as examples of quality TV. “The cultural impact of TV is now greater than movies. TV has become the most innovative medium in pop culture today. And it comes from increasing quality. Television is very healthy right now; TV is the only medium which has increased its audience apart from the internet.”

Given that 80% of Time Warner revenue comes from TV, Bewkes said he’d restructured the media giant as mainly a video programming business. “AOL was meant to take over everything,” Bewkes said, referring to AOL’s 2000 merger with Time Warner. “Unfortunately, it only took over us.”

Funny. Recent projections for 3-D TV adoptions have been re-adjusted, given the global consumer cut-back in discretionary purchasing. 3-D TVs promise to be less robust in sales, both in the US and globally, than Blu-Ray. Which itself is languishing as consumer's wallets are pinched. This is another Wing Chau moment, thinking that spending by consumers (or home-buyers) can go on forever. His view of quality TV, crummy reality junk from Britain, or un-funny "comedies" speaks for itself.

In a story from ABC News, Bewkes touted an initiative to allow cable subscribers to view content online, and claimed:

Jeff Bewkes said the number of television viewers was growing, paid-television penetration was increasing and advertising and subscription revenues were up. He urged the industry not to undervalue its content when making deals for digital distribution.

Bewkes of course believes that cable subscriptions are growing when in fact, they are already decreasing, a prospect Comcast acknowledged when they decided to buy NBCU instead of investing in their core business.

In an interview with the Financial Times, Bewkes said:

“We’re in the second or third year of a planetary global readjustment,” he says, yet TV subscription revenues, programming budgets and time spent watching TV rose through the recession. “Why? People love their TV. They love it on their TV screen and they love it on their new screens,” he argues.

TV’s golden age is no accident of history, he continues, but a consequence of a business model dating to the early days of HBO, the Time Warner-owned subscription channels operator where he made his name, and of previous waves of digital upheaval. “People act like it’s new. People say, ‘What’s going to happen when the digital world gets here?’ There’s this inappropriate comparison to the music business, where something happened to them when digital technology arrived on their shores that was akin to the Vikings landing,” he says.

Yet CNN and HBO were conceived about 30 years ago, where digital transmission and compression technologies first enabled multiple channels to be sent to millions of homes across the country for little cost.

Those advances led to the “vitality” of shows such as The Wire, Entourage or Curb Your Enthusiasm, he argues. “Back when you had the tyranny of free TV” – he repeats the phrase for emphasis – “The tyranny of free TV led to a monopoly of expression [and] the lowest common denominator of shows that could appeal to a mass audience.” [Emphasis Added]

As investors debate how many people will pay for video online, Mr Bewkes mocks those “grasping for some hazily conceived idea that somehow free TV on the internet will bring some sort of paradise to the people,” saying: “Well, it didn’t before.”

Bewkes doesn't get it. Indeed, he has no basic understanding, none at all, of his business. He's as clueless as Wing Chau. The Music Business was no more decimated by the advent of Itunes and Ipods than it was of 45 rpm singles, or 8 track tapes, or cassette tapes. The Music business was decimated not by "Vikings landing" but by crummy music no one wanted to buy in any great numbers. As the youth wave ended, and music and its consumers alike, aged out of pop music creation and consumption.

Let us be honest. The Wire, Entourage, and Curb Your Enthusiasm don't make money. HBO does not make money from ratings (it is advertiser free) or from the minor revenues via DVD sales and foreign sales. These shows are not "vital" since hardly anyone watches them. HBO makes money from subscriber fees. HBO is available to about nearly 100% of TV households, yet only 30% pay for it. That means, that 70% of households find HBO ... not worth the money to pay for it.

Bewkes (he started at HBO) does not even understand his own business. He sells snob-appeal, niche shows to upscale consumers, or those with tastes approximating those folks. But he does not charge Tiffany, Rolex, or Ferrari prices. Thus he's extraordinarily vulnerable to a prolonged recession making his cable channels irrelevant. While the Sopranos, Entourage, and the Wire get lots of press coverage, so does Gossip Girl. None of them get much in the way of viewers. He can't sell these things abroad, for premium prices, most nations have local content requirements, and subsidize local TV production even more than local movie production. Heck in emerging markets, simple piracy is always an option. Once a show is released on DVD, piracy is inevitable, particularly in places like China, and Russia, and India, where rule of law is regarded a quaint obsession of the West, and fairly weak and decadent besides.

The Wire, Entourage, Rome, and the rest exist only to entice HBO viewers to not cancel their subscriptions. It is not as if HBO is growing its subscriber base. Indeed, the "growth" in cable subscriptions are basically phantoms, people getting low deals to deal with the over-the-air conversion to digital, and then canceling them as the fees grow upwards. As detailed extensively here, consumers are finding that absent live sports, cable and satellite are entirely optional.

It is interesting how he phrases "the tyranny of free TV" as something harmful, and his own shows as the bastion of SWPL hipness, coolness, and all together with-it-ness. This is what happens when those who protest against the man, become the man. They become lame beyond belief, trapped by reflexive dislike of a mass culture they rebelled against, and became ... part of.

Jeff Bewkes is the head of Time-Warner. And he does not want to head a mass-audience media company. He is so tied in, emotionally, to the idea of being a hip, cutting edge rebel, he can't even see where the money is. If you want to know, in large part, why TV sucks so much, it is precisely because of men like Jeff Bewkes. Who have nothing but contempt for mass market.

Sure, the mass market can be dumb, if you make it that way. But most of what passes for "hip and edgy" on cable TV, particularly HBO, was lame ten years after it was first conceived, by the Romantics in the 1840's seeking to "shock the bourgeois." An artistic movement one hundred and seventy years old, is hardly cutting edge. It is, in fact, the establishment itself, irony of ironies. Shows like Rome, or Boardwark Empire, mostly seek to titillate their largely female audience with "taboo" sex and such. Exhibit A being "Tru Blood" and the scenes of violent, degrading sex popular among the female (and gay) audience for that show. Nothing has been more stupid, over the years, than the stuff Alan Ball has put on Showtime, from "Six Feet Under" to "Tru Blood." You could dub it, the tyranny of the hipster. Ultra-ironic, standing for nothing, except shocking ordinary people by how "transgressive" he is.

Stuff like "Supertrain," or "Pink Lady and Jeff," or even "BJ and the Bear" and "Sheriff Lobo," legendary bad TV shows, did not drip with contempt for the audience's basic values, and indeed lives. They may have been bad TV, but they were "honest" bad TV, trying at least to entertain the broad audience, not tell them their entire lives and beliefs were worthless. And mass market TV, at its best, far from being a tyranny, was liberating. Shows like the Rockford Files, or the A-Team, or Gunsmoke, or Miami Vice, were of generally high quality, created a common culture, and re-inforced critical cultural values of standing for what is right and good, even at cost, in ways both comic and serious. While never forgetting the main mission, to entertain the audience for an hour or so, never insulting them. Entertainment not by shock, but by well crafted stories with interesting, and likable characters, the audience wanted to see the next week.

Bewkes further touts his view that old content generating companies are still king:

The relative changes in technology and media companies’ market valuations suggest that investors are betting that value will shift from media owners to technology groups, but Mr Bewkes likens this “false premise” to arguments made in the dotcom bubble.

“There’s no reason why their interests and growth should come at the expense of the content industry,” he says, but the trick will be to marry TV’s “very happy business model” with the capabilities of new devices.

Bewkes does not get it. The threat is not 99 cents downloads of TV shows on Itunes. Anymore than the music industry was destroyed by that model. Sure, it erodes margins, on CDs/Albums and DVD boxed sets and the like. But that is just a marginal issue. If Napster, and indeed filesharing and the internet had never been created, the music industry would still be in terrible shape. Perhaps not quite as bad, but still very bad. Because fundamentally, people stopped being willing to pay for crummy music. They weren't 16 anymore. They already had lots of music. They did not need new music, that wasn't any good.

The threat, which investors are starting to see, is that mass media companies don't want to be in the business of mass media, and so make niche content for cable channels that few watch, and collect high carriage fees. All of it vulnerable to consumers canceling cable, and switching to other stuff. That "stuff" might be DVDs they already own. Or downloads and streaming video of new, more popular, broader content on Iphones, or Ipads, or netbooks, or Internet ready TVs, or boxes to connect your TV to the internet. It could even be the Nintendo Wii, or Sony PS3, or Microsoft XBox, and Halo, or what have you.

Anyone with cash can create content. Mass media companies face competition on the content front, because a company like Google can easily throw $3 billion in cash, at creating content, and already has its own distribution network. Called Youtube, and possibly also Android apps in their marketplace. Microsoft, Apple, and Nokia can do the same. Netflix, Redbox, and other players like Amazon also have cash, if less existing infrastructure, but that's a matter of servers in a data center, scaled up.

The traditional barrier to entry, in competing with big media companies, has been scale. You needed lots of cash, both to create content, and distribute it. For TV, it cost News Corp. about $1 billion over ten years to launch Fox Broadcasting. That would be chump change to Google, and they could launch an alternative to say, the CW network easily, online. Creative people are merely workers for hire. Few are locked in to long term exclusive contracts. You could hire, if you had the money, almost any TV actor looking for a new gig. The same is true for writers, directors, producers, and so on. And the scale for distribution of course, is already there. Itunes already acts as a defacto competitor to broadcast TV, along with Hulu.com, partly owned by Fox, ABC/Disney, and NBCU.

And there is money on the table. Lack of broad, mass market serial entertainment leaves a gap in the market. One that can be filled by a Microsoft, or Netflix, or whoever needs to create mass-market appeal to keep folks around their search engine site (Bing?) or provide the next level of entertainment offerings (Netflix). You no longer need to construct an expensive broadcast affiliate network, you can simply put servers in a bunch of data centers. Its far cheaper. Heck, I'm shocked Youtube has not launched its own "channel" of serialized entertainment with creators given fairly favorable terms to put up compelling, original content (i.e. bigger shares of advertising revenue).

Since this is exactly the kind of approach Microsoft used for gaining Windows popularity, and Apple the Iphone. Pushing favorable tools and terms to application developers, that in turn created content available nowhere else but that platform.


The danger Bewkes and the like represent (to their shareholders), is arrogance. It is arrogance that at its heart thinks their creative output, their tragically hip micro-shows, are worth far more than they are. I'd be the first to agree, the stuff Bewkes and the like put out, are not worth nothing. Surely Boardwalk Empires is worth something. But what Bewkes thinks its worth? Not a chance. So ends, in all likelihood, the tyranny of pay TV. It will die when the last hippie punches out the last tragic hipster.