Remember the whole Microsoft-Yahoo (NSDQ: YHOO) courtship and how for a brief period, everyone was talking to everyone else about possible tie-ups and alliances? Everyone's still talking to each other says Time Warner (NYSE: TWX) CEO Jeff Bewkes. Speaking at the Goldman Sachs Communacopia conference, Bewkes said it all had to do with the s-word "scale": "Everybody, including AOL is looking hard at what is the optimal scale." Optimal scale, of course, means multiple things, from algorithimic efficiency (such as how well a search ad network can work) to getting the size of management in line with the actual size of the business. A few times during the chat, Bewkes was hesitant to get into specifics (you know, the lawyers), though near the end, when asked about a timeframe for resolving the overall future of AOL, he offered that "That will probably get decided fairly soon.", though he kind of trailed off at the end, perhaps not wishing to say anything so clear.
-- Economy and Advertising: Bewkes described the faltering economy as the "biggest strategic question" right now, and he joked that the best course of action for everyone would be to "just stay in this room maybe, and don't go outside." But he tried arguing for Time Warner's relative immunity, noting that it's only 25 percent dependent on ads. For their part, pretty much all ad categories are weak, everywhere. At this point, he said the economy hasn't had much of an effect on Time Warner's earnings, revenue and growth."
-- AOL: Not too much new to say. On the future of access, he reiterated a point that's said in the past: Once that division is fully separate from the rest, and it's easy to see it's own cash flow, it's kind of irrelevant whether AOL sells it or not. It's just about the "math" and whether it's better to collect the future (dwindling) cash flows, or sell that future cash flow right now for a lump sump.
-- Acquisitions: Despite everything, TWX could still do some buying, provided that the acquisition offered a decent return (he said that before too at a few conferences last summer, when he was on the "defend the Bebo" deal tour). Interestingly, when he said what categories they might be interested in, he omitted digital. Possible areas include networks, film & TV production and theoretically even print (magazines). Areas he's not interested in: newspapers and, he joked: "I would rule out the acquisition of subprime mortgage debt." (Note: surely he could pick some up on the cheap right now).
-- Digital Transition: The talk actually kicked off with a little discussion of digital philosophy. He said it was an opportunity (of course), noting that margins are higher in many digital areas, like movie rentals, than they were back in the old physical days. While he noted the much vaunted long tail, he also said the head is doing just fine too, hence the company's emphasis on "tentpole" films and TV shows. It's really the middle stuff (not niche, not mass) that's getting kicked in the gut.
Pic courtesy: ellessu.
By Joseph Weisenthal