Jefferies conference: Is content still king?


As the annual television upfront is in full swing, the three-and-a-half day Jefferies Global Technology, Internet, Media and Telecom Conference in NYC featured a power-packed panel 5/11 on the state and value of media content. Panelists included Jeff Bewkes, Chairman CEO Time Warner Inc.; CBS Corp. President and CEO Les Moonves; Michael Garin, member of the Executive Committee of the Abu Dhabi Media Company; and Rob Wiesenthal, EVP/CFO Sony Corporation of America/EVP and Chief Strategy Officer, Sony Entertainment.

One major question was: Many of the most notable value creation stories over the past five years have come from companies which touch upon content, but do not create it or own it (examples include Apple, Google and Facebook). Has there been a shift in the balance of power between technology companies and content companies? Has content become more of a commodity now and has the rise in popularity of user-generated content diluted the value of professionally-developed content?

Bewkes said it’s clear that the value of professionally-produced content has steadily gone up. The earnings and revenue of the content-producing companies—certainly speaking for Time-Warner—all of the parts of the company that produce content has steadily been going up. The value of the hits [popular content] is being magnified by the technology. “Now with the capabilities of internet/digital, the niche product is becoming more feasible. We’ve seen this before when the network cable explosion happened 20-30 years ago as we saw a lot of things like MTV, CNN, HBO come into being, which at the time was thought of as niche. So basically the ability of people across the planet, now 7 billion people, can watch the content. The value, diversity and quality is going up.”

He said the technologies coming along are great because they’ll provide more powerful platforms, more powerful search capabilities for people to get to the content. “Look at social networking—it amplifies the value and accessibility of any hit show, movie, etc.—and you can see it in the numbers.”

Moonves noted that for years there has been a push-pull between the technology companies and the content companies about who is controlling the game. “Content is content, it doesn’t really matter. We want to put it on all of the new technology platforms. We came out with a catch phrase, ‘Wireless is worthless if you are hitless.’ Which means if you have crummy content, I don’t care where you’re watching it, you’re not watching it. So there has been a realization from the technology companies that they need to be in business with us, and we need to be in business with them. It is a food system that works very well with the knowledge that we provide the content, they put it on their new platforms and we get paid sufficiently for it. If you look at most of the major media companies, the premium content providers, all of their numbers are good. As these platforms become so prolific–be it iPad, online, television–no matter where you get your content, it comes from the premium content providers. Yahoo! can’t just turn on a switch. They can’t do the TV shows that we do. They need us in the system. YouTube user-generated content is great—we all look at it, but it’s still not the same as a produced, hour version of NCIS or a Harry Potter movie.”

Another good question to the panel was about the recent Comcast acquisition of NBCU. This is a high value endorsement of the ownership of content by the distribution companies. What does the panel think of the strategic merits of content ownership by large cable distributors? What is the downsides?

Wiesenthal mentioned there are now 55 million screens connected to Sony devices. Back in February they launched the world’s first 24-hour 3-D network with Discovery and IMAX; and the ability for them to have a customer walk into a Best Buy and see a Sony 3-D TV showing unique 3-D content provided by Sony “gives us a real edge over our competition…It does enhance the product mix, it does provide the opportunity to also have a revenue stream with our network products that go beyond the threshold door of the store. Up until 10 years ago, you sold a TV and you didn’t talk to the customer again. Now with iPTV, Wi-fi Blu-Ray players, we have an opportunity to maintain a constant economic relationship with our customers and that’s going to mean an important revenue stream going forward.”

Bewkes said the ownership of content by distributors has worked very well for Time Warner, to take those businesses and reveal offer to you as investors. “More of a choice of how you want us to own both of those and so the stock performance of what was the Time Warner cable plus media company has done extremely well in both sectors—Time Warner Cable has done very well since the separation, Time Warner Media company has done extremely well. If you look at the Comcast NBCU decision, it’s actually the same thinking, because in both cases, it’s a bet on content. We thought the value of content would be clearer by making that separation and I think the market has borne that out. I think that Comcast thought the media business, networks and production at NBC was a very attractive business and they wanted to participate. So it’s kind of a question of what is motivating the investment decision for a spinoff or a merger. In fact, there is a fair amount of overlap in the thinking in both cases.”

RBR-TVBR observation: The combination of owning both distribution and content production is actually becoming more of a necessity today than ever. Having the combination of both allows a media company to make larger, more fruitful deals with technology platform providers that are springing up from all directions — and consumer electronics companies as well. The technology platform providers are paving the way for the content to spread globally and ubiquitously. They have to be a part of just about any distribution deal today if it’s going to be successful. Yes, content is king, but getting it out there—everywhere—is much more of a sophisticated play today than just a few years ago.