Time Warner Rethinks Cable

timewarnerJust as I published yesterday’s post which partly talked about the need for media companies to understand what they are, comes this article in the Wall Street Journal saying that Time Warner is considering reducing its investment in cable systems.  As I was writing “For traditional media companies that believe their mission is to deliver news, not print newspapers; deliver entertainment, not broadcast over the airwaves; the future can be bright.  But it can’t be the same as the past,” (I didn’t catch the article before the post) Time Warner executives were apparently discussing whether their mission is to deliver entertainment or lay cable.

Cable has been a core part of the company and its precursors for decades and is now the biggest contributor to profits. But the long-term future of cable, as the Internet emerges as a viable venue for watching TV, is murky. Some within Time Warner wonder whether the company wouldn’t be better off if it were to get out of cable and double down on the Web — where it already owns AOL — by buying another major Internet company, just as News Corp.acquired MySpace and GoogleInc. bought YouTube.

Then comes something obvious to Time Warner, but maybe not to the general public:

Getting rid of a big chunk of its cable holdings would transform the nature of Time Warner, making it more reliant on its role as a provider of filmed entertainment and print and Web content.

This would be a transforming move for Time Warner, but one that may very well be necessary for its content business to thrive.  Two more points are made:

One argument in favor of getting out of cable is that it would free up resources for more investment in the Web.

[…]

Some also believe Time Warner should exit cable because the dynamics of that business are fundamentally different from those of Time Warner’s content operations, which include Warner Bros., Turner Broadcasting and Time Inc. Most significantly, cable requires substantial capital investment that the other businesses do not.

The parallel to newspapers and printing presses is inescapable.  Oddly, though, the story goes on to say:

One of the downsides of getting out of cable, though, is that it would leave Time Warner much more dependent on slow-growing content businesses of film, television and print. Indeed, exiting from cable would seem to increase the possibility that Time Warner would eventually dispose of its publishing operations, where growth has nearly come to a halt.

Wouldn’t the point of getting out of cable be that TW could then jump start its content growth, including its “publishing” business?  The difference in point of view is made obvious when the writer refers to “film, television, and print” businesses.  Those businesses may be in trouble, but producing information and entertainment is not.  If you chain yourself to a means of delivery, you have problems, but if you open yourself up to many, you grow.

Leave a Reply

Your email address will not be published.