Testifying today in the trial of the government’s lawsuit seeking to block its merger with AT&T, Time Warner CEO Jeff Bewkes painted a grim picture of the threat posed by tech giants, especially Facebook, Google and Amazon.
What Bewkes called “tectonic changes” introduced by the companies, as well as Netflix and others over the past five years, are grounded in the amount of data they can gather about viewers. Time Warner, comparatively, is in the dark, he said. “We know how many people are watching” networks such as HBO or TNT, he said. “But we don’t know their names. Our direct competitors do. …. They know all sorts of things that we don’t.” He hammered home that point on the advertising side, highlighting gains by digital players. It added up to a remarkably self-effacing display for an industry mogul on the eve of the upfronts, where the theme will be the opposite of what Bewkes described: TV as a bastion of reliability and reach in a time of dubious data practices and sketchy automation.
AT&T Chief Randall Stephenson "Impressed" By Disney Streaming, Says NFL Sunday Ticket Will Stay On DirecTV
Building the infrastructure needed to match the data capabilities of tech companies programming and advertising direct to consumers instead of through middlemen or wholesalers is far too arduous, he said. “You need retail centers, call centers, customer service,” he said. Even when launching HBO Now, he said, the company relied on Amazon and Apple for customer acquisition, marketing, tech troubleshooting and other key business functions. And in the end, while HBO has evolved into a decent complement to the mother ship. “we still don’t know what those companies know about their audiences.” An ad for a Chevrolet, he said, is shotgunned out to millions of viewers on Turner, whereas it can be served to a specific digital consumer who is looking to buy a Chevrolet, has good credit, lives in a certain part of the country, and so on.
During a brief recess, an attorney for the Department of Justice loudly mocked Bewkes in the hallway, within feet of reporters. “It’s like Doug and Wendy Whiner!” he said, evoking the 1970s Saturday Night Live sketch. “I can’t build all that stuff. Competition is so hard!”
Testimony led by defense attorney Daniel Petrocelli lasted nearly two hours. The Department of Justice cross-examination of Bewkes followed later this afternoon. AT&T entertainment chief John Stankey closed out the day.
Time Warner needs to combine with AT&T, Bewkes argued, because it would enable the companies to “get through for the next round” of intense media evolution. “It wasn’t that we weren’t trying to do these things [with technology] before the merger. We were. Maybe we could get there without it. … But this was the fastest way.”
While still not as “rich” as the data troves controlled by the largest tech companies, AT&T’s data capabilities would transform Time Warner and have net benefits to consumers, Bewkes said. “The more you know about viewers,” he said. “The more it informs your programming. … It helps you understand how to optimize” everything from production to marketing to distribution.
Under questioning from Petrocelli, Bewkes patiently walked through several foundational aspects of his day-to-day business. Carriage deals. Skinny bundles. Direct-to-consumer apps. As Petrocelli stood at the lectern about 20 feet away, Bewkes often faced the judge, gesturing to emphasize his points and trying to explain the complexities of a changing media landscape with as much clarity and patience as possible. It resembled the scene in a first-class airplane cabin when one passenger asks their neighbor what he does for a living. Judge Richard J. Leon, who is hearing the case without a jury, did not interject with any questions or comments during the whole time Bewkes was on the stand. Observers in the courtroom are conflicted over how he will come to view the larger arguments being made in both directions, especially the key defense premise that AT&T and Time Warner are dwarfed by tech companies. Leon is not a fan of certain technology in the courtroom, certainly – a running joke in the month-old trial has been his disdain for PowerPoint decks. (Attorneys have propped up oversized poster boards on an easel instead.)
One of the cornerstones of the government’s suit is that it would harm consumers and rival companies, in part because it would raise fees but also because it would hamper innovation. Asked by Petrocelli to point to innovations that occurred when Time Warner Cable and Turner were both under the same roof, from 1995 to 2009. Bewkes, who started his career at HBO in 1979 in a junior sales and marketing role, pointed to the “multiplex” that allows viewers to see a dozen separate channels all broadcasting various iterations of HBO at the same time, and video on demand (VOD). Both, but especially VOD, “led us to make a shift in the way we programmed,” and powered the golden age of serialized TV led by shows like The Sopranos, Bewkes said.
Guided by Petrocelli, Bewkes repeatedly attacked government assertions that the combined company could gain undue leverage over other distributors, pulling its programming at will. “It’s ridiculous,” Bewkes scoffed. “It’s not how it works. If any of our channels goes off the air for any period of time, it is catastrophic for us. We lose a lot of money.” As one example, he cited a 2014 fight with Dish Network that wound up costing Time Warner $150 million from a one-month dispute that saw Turner networks go dark.
Bewkes said the Comcast-NBCUniversal deal (which Leon approved) “presented more questions as a vertical deal than ours did” because it involved a broadcast network and local stations. Asked to detail the initial merger conversations with AT&T CEO Randall Stephenson, Bewkes said it stemmed from the two executives meeting for lunch in August 2016 to discuss the fact that “a lot is going on in the industry. … It ended up being a long lunch.”
Subscribe to Deadline Breaking News Alerts and keep your inbox happy.