Time Warner Inc. signage is displayed at the company’s headquarters in New York, U.S. (Photographer: Michael Nagle/Bloomberg)

Time Warner Ill-Equipped to Challenge Netflix, CEO Tells Judge

(Bloomberg) -- Time Warner Inc. Chief Executive Officer Jeff Bewkes told the judge weighing the company’s takeover by AT&T Inc. that the merger will help its Turner Broadcasting unit compete with companies like Netflix Inc. and boost advertising revenue with better data on consumers.

Bewkes, CEO for more than a decade, testified Wednesday in a government lawsuit that’s seeking to block the $85 billion deal. He said he might have reconsidered divesting Time Warner Cable in 2009 if he’d known about the “tectonic shifts” that have since reshaped the industry, such as the emergence of popular streaming services like Netflix.

“We didn’t have all this business of direct video” when the company spun off Time Warner Cable, Bewkes said in federal court in Washington. Back then, he said, “Netflix was still sending you DVDs in the mail.”

Under questioning by Daniel Petrocelli, the lead attorney for AT&T and Time Warner, Bewkes described in detail the two main shifts that have left Time Warner struggling to keep up: technology allowing companies like Netflix and Amazon.com Inc. to stream movies and TV shows directly to consumers, and ad spending on Google and Facebook that is taking off “like a rocket.”

Both trends have drawn customers and revenue from New York-based Time Warner. The company doesn’t have the technological platform or information it needs to keep up, Bewkes said.

The Justice Department suit to block the deal alleges Turner Broadcasting’s integration with AT&T’s pay-TV business, DirecTV, will give the company too much leverage in negotiations to sell its programming to other pay-TV distributors and ultimately hike prices for consumers. Turner operates CNN, TBS and other cable networks.

Bewkes said the merger would allow the company to catch up, especially in terms of ad spending.

“We’ve been trying to do it, but it’s hard to do it at the scale of our competitors,” he said.

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