Change in the trend of content consumption and distribution
The change in video consumption patterns is forcing many media companies, including Time Warner (TWX), to rethink their business strategies. As more Millennials watch videos across different platforms, including mobile and broadband, content distribution is also changing.
Many media companies are either launching their online television services with skinny bundles or customized subscription packages and more efficient targeted advertising. As a result of this changing scenario, Time Warner’s CEO, Jeff Bewkes, who was present on AT&T’s (T) 3Q16 earnings call, stated that he believed TWX’s acquisition by AT&T would enable the combined company to offer its content in a more effective way across different platforms and attract more viewers in the process.
This view was a departure from the earlier point of view Time Warner expressed during its disposal of Time Warner Cable.
Rationale behind Time Warner’s spin-off of TWC
In 2009, Time Warner spun off Time Warner Cable as part of its restructuring process. Time Warner Cable has since been acquired by Charter Communications (CHTR). Time Warner Cable is among the largest providers of video, high-speed data, and voice services in the United States. At the time of Time Warner Cable’s spin-off, TWX said that it believed content creation and distribution didn’t go together.
Bewkes was asked what made Time Warner change its point of view. He stated that at the time of Time Warner Cable’s spin-off, the company was a cable company with a regional presence and a small footprint, which covered 12% of the United States. Bewkes said that as a result, it needed to be consolidated at a more efficient scale at that time.