Three big publishers and AOL are set to launch Bookish, a “new digital platform for readers.” Hachette Book Group, Penguin Group, and CBS’ Simon & Schuster are backing the new site, which is supposed to launch this summer; AOL will promote the property and handle ad sales. A press release describes Bookish as “a place for readers to find great content about books and authors from a variety of publishers.”
So we’ve heard what Time Warner CEO Jeff Bewkes thinks about Netflix. What does Reed Hastings think about Time Warner?
He’s full of good will, too! No surprise: The Netflix CEO has always tried to present his company as an ally to Hollywood and the TV guys. So everything should be cool from here on out, right?
The reality is that the studios and TV networks aren’t quite sure what to do about Netflix: They’re happy to take Hastings’s checks, but they’re worried he’s using the money to disrupt their businesses.
So let’s hear Hastings make his case in his own words, via an interview I conducted with him on Tuesday. That’s a day before Bewkes made his latest comments about Netflix and other Web video services. But I don’t think Bewkes said anything that would have changed Hastings’s answers.
I used my time to focus primarily on Hastings’s approach to the TV business, but we touched on some other topics as well, including his take on competition from Amazon and Hulu.
Alas, right after I finished up with Hastings, I realized I had forgotten to ask him about Apple’s new subscription rules and what impact they would have on his Web service. I tried following up, but it was too late: Hastings, via a PR rep, declined to comment.
Here’s an edited and condensed transcript from our talk:
Peter Kafka: There’s been a lot of rumbling from Hollywood about slowing down your growth by delaying or cutting off your access to content, and Time Warner has been the most vocal about this. What happens if they follow through?
Reed Hastings: We license only a small part of our streaming content from Warners today, and we hope to be able to license more as we go. We’ll see what their perspective is on it. But we’re doing great, even though we haven’t licensed essentially any Time Warner streaming content.
But beyond streaming, they could make it much harder for you to distribute their DVDs, too. You have a distribution agreement with them now, but it will expire this year.
Discs I think we should set to the side, because we’re mostly focused on streaming. And on streaming we only license a few shows from them today. It’s a very tiny amount.
And [because they're] not licensing to us, they’re missing out on a lot of revenue, and we’re putting that revenue into their competitors. We spend a lot of money with News Corp. We spend a lot of money with Viacom. That’s a choice that they’re making.
Do you think Jeff Bewkes is more concerned about your impact on his Warner Bros., or his HBO pay channel?
I’m not sure. You’d have to ask Jeff that.
I ask because in the ongoing cord-cutting/cord-shaving/cord-nevers debate, there seems to be a growing consensus that services like Netflix are most competitive with premium TV like HBO.
We compete with HBO like baseball and football compete. We sell to the same person, we deliver some of the same emotion, but it’s not direct competition. People subscribe to both. And the people who love us often subscribe to HBO.
They don’t have any of the same content we have, and we don’t have any of the content they have. So it’s a pretty indirect competition for time and money.
How many Netflix subscribers also have HBO?
The last time we checked was a couple years ago. It was about a third.
Again, there really isn’t a direct competition. We’re creating this new market where consumers get to choose what they want, and it’s on demand, and it’s a very different experience.
In your last shareholders letter, you specifically referred to competition from Amazon and Hulu Plus. Do you think those are your two biggest threats?
What we said is that they’ve entered the market in the last year, and that we’ve continued to prosper and grow.
You’ve been focusing more energy on acquiring TV programs. And while you keep saying you’re not interested in providing TV shows the day after they air, like Hulu does, many people think that’s what you’ll do sooner or later. How do you look at TV programming?
TV content on DVD was about 20 percent of our viewing. And on streaming it’s about half. The difference between “Terminator” 1, 2 and 3, and episode 1, 2 and 3 of a TV show is not that large. We’ve always been consistent that movies and TV shows are what we do, and we haven’t changed.
We’re not focused on same day [TV shows], because what we really want to do is spend that money on prior. You can buy two or three prior season shows for the price of a same day show. You can get same day on cable, satellite, pretty easily.
What about when you have more money? Would you get into same day then? Or do you always want to be an archival business?
I wouldn’t call it archival. [Comcast CEO] Brian Roberts’s phrase was “rerun TV.” And there’s a lot of great reruns, because you might not catch everything when it’s new and fresh. At least for the next five years, we’re really focused on that rerun model on television, and the pay [TV window] model on movies. And we have our global expansion, which we’re putting a lot of money and time into.
But you are paying for the first run of “House of Cards,” and possibly other shows. That seems like you’re edging closer to premium content.
We like premium content. We just did a big deal licensing “Glee,”and a big deal licensing “Mad Men.” And “House of Cards” is similar except that it’s premiering on Netflix.
So it’s a little bolder and a little riskier than other shows, but we’re not really in the original content business. We didn’t create that content, we didn’t find the script, we didn’t put the cast together, we didn’t talk Kevin Spacey into it. And it’s a small part of what we do, as a test.
If it works, will you build out a staff to find more of this stuff, or develop it?
If there’s a market of buyers, then those shows tend to get developed. We’ll take it year by year and see what happens.
We tried an experiment a couple of years ago with Red Envelope entertainment, where we bought films out of Sundance and similar festivals. And it was very fun, but we lost $10 million, and then we stopped. So we’ll see what we find.
So you don’t see yourself producing originals in the way that HBO does?
Very unlikely, especially given my background. What we’d prefer to be is the buyer of prior season, or expired season, like an “In Treatment.” Or have all the episodes of “Dexter.” We think if we focus on prior season, we can help build audience for current season.
Speaking of expired season, I’ve heard some networks talk about extending the life of shows they were going to cancel if you’re going to pay them to keep going. Does that make sense?
Yes. For example, “Friday Night Lights” wasn’t going to get continued two seasons ago on NBC, and DirecTV did a deal to extend that show. So we can see ourselves doing something like that–extending a season of something that was doing well on Netflix.
Greycroft, the New York firm run by the revered Alan Patricof, put out a release trumpeting Campise’s move from senior associate to principal on April 25, as part of a series of hires and org chart shuffles.
Now she’ll be doing essentially the same thing–sourcing and evaluating new Internet and digital media investments–for more money at Venrock’s New York office. People familiar with Campise say the rival firm poached her with an aggressive offer.
Jumptap, a mobile ad network that has raised some $70 million over the last 6 years, has now raised $25 million more.
Previous investors AllianceBernstein, General Catalyst, Redpoint Ventures, Summerhill Ventures, Valhalla Partners and WPP participated in the newest funding round; the company says new investors came aboard as well, but won’t name them.
Much of the funding had previously been disclosed via a regulatory filing in April.
Jumptap is one of several well-funded mobile ad companies yet to be snatched up by a bigger player. But many have: Google bought AdMob, Apple bought Quattro Wireless, and last month ValueClick bought Greystripe for $70 million. Competitor Millennial Media, which raised its own big round in January, talks often about its ambitions to go public.
CEO George Bell joined the company less than a year ago; he had previously been a managing director at Jumptap backer General Catalyst.
A first look at News Corp.’s March quarter earnings: Revenues of $8.26 billion and adjusted earnings of $0.26 per share. Analysts were looking for revenue of $8.42 billion and earnings of $0.27 per share.
The short summary for Rupert Murdoch’s media empire, which owns this Web site: Results from its movie group are down, but that’s because last year’s results included “Avatar”‘s ginormous numbers. The company’s TV group has rebounded, and its cable division continues to throw off cash.
And MySpace continues to drag the company’s numbers down: The “other” group that News Corp. lumps the social network into reported losses of $165 million, “primarily due to increased losses at Myspace, stemming largely from lower advertising and search revenues partially offset by lower operating expenses.”
No Murdoch on the earnings call today, so no live blog (COO Chase Carey is less likely to say interesting things on a minute-by-minute basis). But I’ll drop in where warranted.
For instance: Asked to comment on The Daily’s performance, Carey says it’s a work in progress, which lost $10 million last quarter. Then, in the background, someone–most likely CFO Dave DeVoe–mentions “800,000 downloads.”
Assuming that’s the actual number, that’s the first time anyone from News Corp. has talked about the iPad app’s performance. I’ve asked News Corp. to confirm.
UPDATE: News Corp. officials say that number–which is for downloads, not paid subscriptions–is “in the ball park” but a bit low. Reminder that The Daily launched February 2.
And semi-privately, Bewkes’ lieutenants have been suggesting that they’re going to pull back on content they supply to Netflix, and may cut it off entirely in the near future.
There’s definitely some theater involved here, put on for the benefit of investors worried that Netflix poses a threat to several of Time Warner’s properties: His Warner Bros. studio, its Turner cable networks, and its HBO premium cable network.
Because even while Bewkes and company have been lobbing spitballs at Netflix, they’ve been talking to the service about new distribution deals, sources familiar with the companies tell me.
In any case, Bewkes has been taking pains to soften his rhetoric recently. Last week, at the Tribeca Film Festival, he sent some verbal bouquets toward Hastings. And today he did much the same during Time Warner’s earnings call.
I’ve transcribed and edited Bewkes comments below. But he’s wordy, so even my abbreviated version runs long. Short version: We’re cool with Netflix because they’re complementary, not competitive. But that means we’re not going to give them our newest stuff, either.
This also happens to be what Hastings himself says. But more on that later. Here are Bewkes’s comments from this morning’s conference call:
Analyst: Can you talk about your relationship with Netflix?
Bewkes: Our view of Netflix has been very consistent. I’ve tried at times to be humorous about it, sometimes to make a point, so let me be clear: We think there’s definitely a role for subscription VOD services, library services, and Netflix in the ecosystem.
What is the role? Clearly it’s a way to give consumers access to a deep library of content that they couldn’t easily get before, particularly older shows. Although they’ll probably be able to get them more easily in other places now.
But it’s been a useful thing to get subscription services for products you couldn’t get before. There’s been some utility for viewers in being able to get serialized shows that don’t play as well on traditional cable networks or in syndication.
And because SVOD monetizes some content that couldn’t be monetized before, and it monetizes some content better than it was monetized before, particularly the older library stuff, then it can add money to the ecosystem. And that’s good for everybody.
But what we’ve always said is that you need to make sure SVOD doesn’t devalue the content and disrupt the ecosystem. So our view has been that it is not usually the right outlet for the newer, higher-value content that is functioning much more powerfully for viewers, on other kinds of networks, in other windows.
We’ve said because of all of that that we do not think it would be a suitable substitute for multichannel TV for most consumers. And therefore, we don’t think it will upend the multichannel TV business.
Q: Can you talk a bit more about cord-cutting, and whether you think Netflix and other Web services encourage it?
Bewkes: We watch it closely, but we haven’t seen it yet.
I think Netflix has around 23 million subs in the U.S. But we believe there are only about 4 million households that have broadband and no multichannel TV. And that number is almost unchanged since Netflix started its streaming service.
So even though people like the service, it has not led to very many Netflix subs cutting the cord. Looking forward, it’s hard to see how subscription TV becomes a replacement for multichannel TV.
Because as far as we can see, it probably won’t be able to economically offer a lot of the current shows, sports, live events, first run things of all kinds, that are available on all the high-value networks. And we don’t think that very many subscribers are going to be willing to give those things up.
We don’t think U.S. consumers want less choice. The record of the last 30, 40 years has been they want more choice.
Just to really acid test that, there are already a number of stripped-down TV packages that are available. And very few consumers take them.
Dish Network has a “focus on value” package, and its lowest-priced package is $24.99. Most people don’t take that, which is why the average revenue at Dish is closer to $70.
And then add the last part of the puzzle, which is you can see it this week at HBO GO: TV Everywhere [which means] VOD availability, for all the networks everybody loves. It’s going to make the current network subscriptions, foremost among them HBO, even more palatable.
So this really suggests that things like Netflix are welcome additions.
Disqus, a startup that operates a commenting platform for 750,000 Web sites, including this one, has raised a $10 million funding round led by North Bridge and Union Square Ventures. The start-up, hatched at Y Combinator in 2007, had previously raised $4.5 million from USV and others. It faces competition from Facebook, which just launched its own commenting system; Twitter may also offer a competitive product.