Wall Street has rewarded CEO’s transformation of Time Warner

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Posted: Monday, December 23, 2013 12:00 am

NEW YORK — Most media moguls spend their time building empires.

Time Warner Inc. Chairman and Chief Executive Jeff Bewkes has spent the last several years dismantling one.

Gone is AOL, the online platform that acquired Time Warner in 2000 in a deal now considered one of the worst in corporate history. Discarded, too, is Time Warner Cable, the nation’s second-largest cable operator. Time Inc., the venerable magazine and publishing house, is next, with a spinoff planned for 2014.

Even Bewkes’ office at the posh Time Warner Center, overlooking Central Park, may soon be history. The company is expected to leave the luxurious address, a symbol of the excesses of the old Time Warner, for the less glamorous far west side of Manhattan in a few years.

Relocating is not just about sending a message. It is also about unifying what’s left of Time Warner under one roof for the first time since Warner Communications and Time Inc. agreed to merge almost 25 years ago.

“The transformation of the focus of Time Warner is probably a much bigger change than any media company in the last five years,” said the energetic and trim Bewkes, who at 61 looks like he fell out of a Brooks Brothers catalog.

Armed with degrees from Yale and Stanford, Bewkes started at HBO — then part of Time Inc. — in 1979 and gradually rose through the ranks, becoming chief executive of the pay channel in 1995. Along the way he gained a reputation for being a pragmatic executive who was unafraid to be blunt when the situation called for it and unwilling to let sentimentality get in the way of business.

“From the time I first joined the company, he was the rising star,” said former Time Warner Chairman Richard Parsons, who groomed Bewkes to succeed him. “He’s smart as a whip and focused 24/7 on the business.”

Wall Street has rewarded Bewkes’ efforts. About a month after he became chief executive in January 2008, Time Warner stock fell below $16 a share. Now it’s above $65, almost a 40 percent gain from a year ago. In the third quarter, which ended Sept. 30, Time Warner posted a profit of $1.18 billion on revenue of $6.9 billion.

“They’ve done a much better job in the past couple years than I thought they could,” said Sanford C. Bernstein analyst Todd Juenger, adding that Bewkes has “pioneered a trend that says these big media conglomerates are getting too messed up in their own complexities.”

Those complexities were once seen as necessary for media giants hoping to find a combination of assets that would protect their bottom line from an uncertain future. The 1989 marriage of Time and Warner paired magazines with a Hollywood studio, but the real motivation was to combine their respective cable holdings to create a pay-TV distribution juggernaut.

Then in 1996, Time Warner acquired Turner Broadcasting, parent of cable networks CNN, TBS and TNT, to get content to go with that distribution.

The synergy strategy culminated with the 2000 marriage with America Online, the biggest merger in American history, bringing new and old media together. AOL Chairman Steve Case said it would “transform the landscape of media and communications.”

The only thing that got transformed was Time Warner. Its stock plummeted as investors lost confidence in management’s vision and AOL went from being the pipeline of the future to a punch line. In 2003, Case was gone, and in 2009, Bewkes cast off AOL for good.

Bewkes, who while at HBO oversaw the network’s push into original programming with shows such as “Sex and the City” and “The Sopranos,” decided instead to bet that in the future distribution would become ubiquitous. Time Warner Cable was spun off in 2009, and the company focused all its efforts on entertainment.

“He knows good content will always create value,” Parsons said.

Warner Bros., which generated $2.7 billion in revenue in the third quarter, is wrapping up one of its strongest years ever. Its TV unit is the most powerful producer on television, making hits for CBS (“The Big Bang Theory”), NBC (“The Voice”), ABC (“The Middle”) and Fox (“The Following”).

“If you bring us a movie or a show, we can make more money out of it than if you took the exact same movie or show and gave it to somebody else,” Bewkes said. “That’s the advantage of going to Warner Bros.”

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