Jeffrey Bewkes, the new chief executive of sprawling, stalled media conglomerate Time Warner Inc., hardly fits the mold of a swashbuckling visionary.
Seven years after the disastrous merger with America Online—and the subsequent vaporizing of $125 billion in shareholder equity—the company, its massive shopping mall–cum–headquarters astride Columbus Circle, suffers from a lingering post-traumatic stress disorder. He’s supposed to fix that.
Time Warner’s battered stock price—which closed at about $18 a share on the day Bewkes’s long-anticipated promotion was announced in early November—actually slid below $16 during Bewkes’s first week on the job. Soon he’ll move down the hall on the eleventh floor of the Time Warner Center from his chief operating officer’s lair to the CEO’s suite, with its zebrawood finishes and a party-ready terrace with views straight across Central Park and beyond.
A former colleague describes Bewkes, 55, as a quasi hypochondriac who fastidiously washes up after shaking hands (“If you’ve got a cold,” says the colleague, “Jeff won’t come anywhere near you”) and can expound learnedly on the relative merits of various antibiotics. Slender as a paring knife, with his handsome features keenly chiseled, Bewkes (pronounced byu-kiss) seems to lack unnecessary appetites or aspirations. He has, by most accounts, stayed uninfected by the sorts of virulent megalomanias endemic to the media business. This scrupulous detachment is among his chief qualifications for the job. It’s how he got there.
“With other people who rise in a corporation, they change how they dress, they change their barber, sometimes they get a pinkie ring,” says HBO Documentaries chief Sheila Nevins, who has known him since they both went to work for the fledgling pay-television channel in 1979—when “Jeff was that skinny kid from Yale in accounting”—“but Jeff didn’t change. He didn’t get a vineyard, he didn’t buy a castle. He still has a tuna sandwich for lunch, and doesn’t even eat the whole thing.”
While running HBO and then overseeing Time Warner’s entertainment and networks group—including Warner Bros., New Line Cinema, and the Turner cable channels—Bewkes resisted making the hajj to Sun Valley for Herb Allen’s mogul convention until he could no longer avoid it. His first appearance was in the summer of 2005, when he was about to be named CEO Richard Parsons’s No. 2.
“He’s extremely smart and he thinks on a global scale,” attests David Chase, creator of The Sopranos, which Bewkes decided to put on HBO. “He can talk very easily about complicated political-economic conditions and situations, and he’s one of the funnier guys I’ve ever met. He projects an absence of panic and fear.”
That is a useful trait in a once-imperial company recently surpassed by News Corp. as the planet’s biggest media conglomerate by market capitalization. “Jeff is his own man,” says Don Logan, who was co-deputy to Parsons with Bewkes. “He approaches business decisions by trying to gather the facts and information and tries to make fact-based decisions. He’s creative, he’s got a great sense of humor, doesn’t take himself too seriously, and he’s got a great temperament for what’s ahead.”
Bewkes is known for being an outrageous flirt, especially with actresses. (“He’s a perfectly charming man,” says Sex and the City star Sarah Jessica Parker, who has known Bewkes for a decade, “and, superficially, quite easy on the eyes.”) But the opinion-makers of high finance have yet to be seduced. “It’s not clear there’s any simple solution available,” says Logan, who’s retired to his hometown of Birmingham, Alabama. “But Jeff is going to have to make some kind of a decision just to demonstrate to Wall Street that he’s doing something. He’s probably facing a ‘first 100 days’ scenario to show he’s willing to take things up and change things, whatever those things happen to be. I don’t have any ideas.”
Back in November, Parsons appeared at a VIP conference hosted by the investment firm Quadrangle Group LLC.
“If you were Jeff, coming in—” he was asked.
“If I were Jeff,” Parsons interrupted, “I would shoot myself.”
The thing is, there are a lot of ideas out there of what Bewkes could do besides shoot himself. The question is whether any of them are going to do any good. The same day Parsons made his joking suicide recommendation to his successor, Bewkes submitted to a rare public grilling at the Nielsen and Dow Jones Media and Money conference. Keeping a poker face that suggested he found the situation mildly amusing, he coolly rebuffed Wall Street Journal online executive editor Alan Murray’s efforts to get him to reveal his plans to fix Time Warner: Will he unload AOL? Sell Time Inc.? Spin off Time Warner Cable?
“Every option is on the table,” Bewkes intoned. Swallowing his words, he sounded as though his uncensored thoughts were lodged somewhere in his throat. “If all these businesses are going so well,” Murray asked, “why is the stock price just sitting there?”
“Because people don’t know!” Bewkes answered. The audience at the Grand Hyatt chortled.
“Stock price—are you gonna make it go up?”
“Yes,” Bewkes replied, provoking another laugh as he let his one-word answer hang there without elaboration.
“When we’re back here five years from now—one year from now—where’s it going to be?”
“I’m not going to predict the stock price,” Bewkes parried. “Whether [Time Warner] is the biggest is not the main thing. It needs to be the most profitable.” With a surprising burst of passion, he added, “We’re not waiting three years for the stock to go up. It has to go up now.”
“Anything else you want to say about that?”
As for the new job, Murray asked, “Did you consider turning it down?”
“No. I need the money.”
Bewkes’s five-year employment contract calls for a $10.25 million pay package in 2008 plus long-term annual performance incentives of up to $8.5 million in stock options—not to mention command of a fleet of four Gulfstream jets. But he’s never really needed the money. Jeff and his two brothers—the older Gar and the younger Bobby—grew up in the gilded suburb of Darien, Connecticut. Their father, E. Garrett Bewkes Jr., was a top executive at Norton Simon, a food, cosmetics, and media conglomerate that owned a large stake in the production company that made The Avengers, who later went on to make a fortune as a leveraged-buyout entrepreneur. Like their father, they attended Deerfield Academy in Massachusetts.
Jeff competed on the debating team and learned to harness the power of logic, memorably persuading school officials to rescind compulsory attendance at breakfast with the argument that it wasn’t fair to expect students to study past midnight and then require them to appear in the dining room at 7:30 a.m. (The Deerfield dean’s office occupies an Italianate mid-nineteenth-century house that, owing to generous Bewkes-family donations, was rechristened Bewkes House in 2006.)
He then went on to Yale, where I met him. He was a senior and I was a sophomore in the early seventies, taking our meals in the same residential college. To the callow underclassmen of Yale’s Pierson College, Bewkes was a somewhat romantic figure of countercultural élan—a tad scruffy and artistic-looking in a battered leather jacket and definitely more successful with the opposite sex than we were.
Vietnam was winding down, and Bewkes escaped military service when the draft was discontinued in the nick of time. His closest friends had been on track to become journalists, filmmakers, painters. Instead of summering at his family’s place on Nantucket after his junior year, he got a job, thanks to his father, as Diana Rigg’s chauffeur.
During spring break the following year, Bewkes and friends flew down to Haiti, where Heyward Isham, the father of fellow Yalie Chris Isham (now the D.C. bureau chief of CBS News), had recently taken up residence as U.S. ambassador. In the coastal town of Jacmel, Bewkes and classmate Leslie Redlich, a San Francisco shipping heiress (nowadays a journalist better known by her married name, Leslie Cockburn), danced the night away in an authentic voodoo ceremony, resisting the impulse to enter a full-on trance with the young women whirling around them. In Haiti, Bewkes acquired a horrible blue-and-white patchwork suit, which he only occasionally wore to classes, and the Creole nickname “Bo Bo Boulet,” loosely translated as “Let’s get it on,” according to another classmate, New York artist Jimmy Angell, the grandson of Yale’s fourteenth president, James Rowland Angell.
It was, and remains, a tight-knit group. Another of Bewkes’s college friends, campus rock star Walter Parkes (who fronted the popular New Haven band the Rockets), eventually became the production chief of DreamWorks Animation SKG as well as one of the producers of the Oscar-winning film Gladiator. Parkes’s Yale girlfriend, Peggy Brim, became a television journalist after graduation and was a top aide to ABC News president Roone Arledge. She and Bewkes eventually married, and they divide their time between Manhattan and Greenwich, Connecticut, raising their blended family of three children. (Bewkes’s first marriage ended in divorce.)
When I ran into Bewkes in April 2002 at a Washington screening of The Gathering Storm, an original HBO movie about Winston Churchill in the years before World War II, I barely recognized him.
“You’ve cleaned up well,” I said.
“I got off the drugs,” he joked.
Decades later, Bewkes reveled in spinning tales of his dissolute youth to his colleagues. “He likes to tell the bohemian stories,” says a friend. “It’s how he wants to be characterized—as a person who is different from what the résumé says.” But the résumé probably told the real story.
Fresh out of Yale in 1974, Bewkes wasn’t sure what he wanted to do. For a while, he worked as a researcher at the NBC News documentary unit. But the assignment eventually ended and he was laid off. So he applied to various law and business schools and was accepted by Stanford’s M.B.A. program. Bewkes didn’t throw himself into academics at college, “but when he got to Stanford,” Angell says, “things changed dramatically. Once he decided that he was going to undertake a business career, he became very focused … He came back to New York and was working at Citibank, and [Yale classmate, now horror-movie actor] Bill Moseley and I were always trying to get Jeff to go with us to clubs. We’d all be having dinner, and we’d say, ‘Come with us to the Mudd Club, we’re going to see Talking Heads,’ and Jeff would say, ‘No, I’ve got to be at work in the morning.’ ”
Bewkes bristles at the suggestion that he’s a member of a privileged East Coast elite—preferring to align himself with his father’s salt-of-the-earth forebears who emigrated to New Jersey from the Netherlands in the late-nineteenth century, and to reminisce about a childhood spent hanging out in his German maternal grandfather’s dry-goods store in Phoenixville, Pennsylvania. As an undergraduate, he’d argue with classmates like banking heiress Sarah Pillsbury, who would make impassioned assertions for expropriating the ill-gotten gains of evil corporations on behalf of the masses. “Yeah, but if we do that, you’ll still have a beach house, and I don’t have shit,” Bewkes countered—not quite accurately. “So I’d like to get out in the world and get something going here.” (Pillsbury went on to work with Bewkes and HBO on her film And the Band Played On.)
“If I were Jeff, I would shoot myself.”
—Richard Parsons, chairman of Time Warner
The American Lawyer founder Steven Brill, who grew up in Queens and was two years ahead of Jeff at Deerfield and Yale, recalls receiving a pained phone call from Bewkes in 2003 when the Los Angeles Times quoted him about Bewkes’s family: “They were loaded.” “Jeff was really offended by it,” says Brill. “And I guess he should have been. But to a scholarship kid from Far Rockaway—one of the first Jews to attend Deerfield—everybody who lived in Darien was rich.”
“If I were Jeff, I would follow Dick’s advice—I would go ahead and shoot myself.”
—Don Logan, former head of Time Inc.
And it’s hard to escape the fact that “Jeff was empowered by his background,” as Los Angeles gallerist Laurie Frank, a friend from Yale, puts it. “I think Jeff was always being groomed to be a CEO, to be the head of a company like Time Warner.”
“Jeff was always very close to his dad,” says Angell. “And some of his drive comes from his wanting to be acknowledged by him—to be viewed as an equal.”
Good breeding, of course, gets one only so far. “It’s not like they were holding a spot,” says a source close to Bewkes. “You don’t just go from Yale to Stanford busi ness school. You couldn’t go from an entry job at HBO to the head of HBO and Time Warner. You struggle through the mud to get to these places.”
In the late seventies, Bewkes was working in Citibank’s commercial-lending department. He did well enough that his bosses wanted to transfer him to Hong Kong. Instead, in 1979, he found a $20,000-a-year position at Time Inc.’s upstart HBO.
Among his first jobs was sweet-talking hotel chains into subscribing to the movie channel (another product he was sent out to peddle, the family-friendly channel called Take Two populated with G-rated movies, failed). He then became sales director for the launch of Cinemax. From there, he rose smoothly through the ranks—his career nurtured by Michael J. Fuchs, who is widely credited (not least by himself) for taking HBO beyond just some sports and stand-up comedy into an original programming powerhouse. Among Fuchs’s memorable successes were Tales From the Crypt, Dream On, Arli$$, and The Larry Sanders Show. By 1991, Bewkes was HBO’s president and COO, Fuchs’s trusted No. 2, presiding over international expansion, negotiating rights with the Hollywood studios, and enlarging the independent-production business that made shows for the broadcast networks.
Few can match Bewkes’s institutional memory and deep knowledge of Time Warner’s component parts. He was present at the creation, watching them morph into a sprawling global media-and-entertainment empire with 90,000 employees. Bewkes had gained the confidence of a succession of executives who were fierce rivals of one another. They included Time Inc. head Nicholas J. Nicholas, who engineered the 1990 merger with Warner Communications chief Steve Ross; former HBO chief Gerald Levin, who ended up running Time Warner when Ross died ten months after Levin orchestrated the March 1992 ouster of Nicholas (which shocked Bewkes; Nicholas had been a mentor); and Fuchs, Bewkes’s immediate superior, who clashed with Levin while talking himself up as Time Warner’s future CEO, balked at reporting to the new vice-chairman, Ted Turner, and tried to retain his position atop HBO while adding the company’s music division to his domain.
Levin ultimately fired Fuchs for his perceived insubordination and installed Bewkes, who was president of HBO, to replace him. “You see a lot of ass-kissing out there, but Jeff did not do that,” Fuchs says. “It wasn’t easy to stay on the right side of Levin … Jeff has a certain grace about him. It reminds me of what they used to say about Joe DiMaggio. He never looked like he was running in the outfield, but he would catch the ball nevertheless.”
As the chairman and CEO of HBO from 1995 to 2002, Bewkes picked up where Fuchs left off, tripling the original programming budget to more than $700 million. He pushed for multiple channels, video on demand, DVD sales, and other weapons in the war to maintain HBO’s dominant market share against competition from Viacom’s Showtime and other players in the expanding cable universe. By the time Bewkes “moved uptown to corporate” as chairman of Time Warner’s entertainment and networks division in 2002, HBO had over 38 million subscribers worldwide, churning around $300 million in revenue, month in and month out (while operating income tripled).
Bewkes’s creative partner, and eventual successor, was Chris Albrecht—a former stand-up and talent agent who first met Bewkes in 1987, when Albrecht worked for Fuchs on the programming side and Bewkes was a numbers cruncher. They became close friends, bonding over their shared successes: The Sopranos, Sex and the City, Entourage, and Curb Your Enthusiasm, to say nothing of hit TV shows Warner produced like Everybody Loves Raymond and blockbuster movies like My Big Fat Greek Wedding.
“Superficially, he’s easy on the eyes.”
—Sarah Jessica Parker, star of Sex and the City
“The difference between Jeff and Michael is, if Michael was the teacher and we were the pupils, Jeff was the principal and we were the faculty,” says Albrecht. Bewkes trusted his gut, he says. He was willing to roll the dice and spend frightening amounts of money if he believed the project was worthy. Albrecht recalls driving over with Bewkes in Los Angeles in 1999 to meet with Steven Spielberg and Tom Hanks at a small temporary production office about Band of Brothers, a World War II mini-series based on a book by Stephen Ambrose.
“Jeff had to make the decision,” Albrecht recalls. “We had initially thought it was going to cost us $75 million, but we knew that was on the low side. So Jeff said in the car, ‘Okay, we’re not going to go a penny over $90 million, no matter what they say. That’s it!’ So we walk into the room and Steven and Tom lay out the whole plan and then Steven says, ‘And we can do the whole thing for $100 million!’ And I looked at Jeff, and Jeff looked at me, and then looked back at Steven and Tom, and said, ‘Okay.’ It ended up costing $120 million by the time of the final budget.” After a less than auspicious debut—unfortunately scheduled on September 9, 2001—the series ended up being hugely profitable because of DVD sales.
Similarly, with The Sopranos, Bewkes relied on his instincts and Albrecht’s judgment, even when some doubted that the series would fly. After Fox rejected the script for the pilot, David Chase revised it and brought it to Albrecht at HBO. Albrecht ordered up the first episode and spent about $3.5 million to produce it. “I showed it to Jeff and basically he asked, ‘Can we keep making it this good?’ ” Albrecht said. David Chase recalls: “The show didn’t test all that well. Jeff had to be party to disregarding the research and saying, ‘Who cares what these focus groups say? We like this.’ That takes something special.”
“He can be stubborn about things,” Nevins says, recalling that shortly after Bewkes took over, he objected strenuously to her proposal to produce a sympathetic documentary about celebrated death-row inmate Mumia Abu-Jamal, a Philadelphia radio personality and former Black Panther who was convicted of gunning down a police officer. “He thought the guy was a con man and didn’t belong on HBO.” But Bewkes didn’t stop Nevins from making the documentary, which aired to respectful reviews in 1996. “He made it very clear that I was to take responsibility for it, and he told me it better be right. And that scared the shit out of me … In the end, he knew that HBO had to be controversial, and it had to be on the cutting edge, because otherwise it wasn’t ‘television worth paying for.’ ”
In May, in what was probably the most painful moment of his career, a heartbroken Bewkes fired Albrecht, who’d pleaded no contest to misdemeanor battery after the police intervened in an argument with his girlfriend in the parking lot of the MGM Grand in Las Vegas. Albrecht’s fate was sealed a few days after the dustup when the Los Angeles Times revealed that back in 1991, Bewkes had approved a nearly $500,000 payout to a female HBO executive who had left the company when her extramarital affair with Albrecht, her also-married boss, had ended badly. Today, Albrecht and Bewkes remain cordial if no longer close.
On January 10, 2000, one year to the day after the first episode of The Sopranos aired, Time Warner’s Gerald Levin and America Online’s Steve Case announced that the two companies were merging. Actually, AOL swallowed up the bigger company at the height of the Internet boom with wildly inflated stock. Time Warner’s stock price soared to $102 on that day in a spasm of delusional fervor, but the post-merger stock subsequently crashed to $8.60 before leveling out and flatlining at about $17.
Parsons, who was one of very few executives to whom Levin confided details of his clandestine merger talks, helped negotiate the final terms. At the time, the deal looked pretty good to everyone, and even Bewkes (not among Levin’s confidants on the merger) sipped the Kool-Aid. “No, hang on to it, it’s going to go up,” Bewkes advised a colleague who wondered if he should start unloading stock. He soon regretted his faith.
And yet, in early 2002, when Parsons, the freshly minted CEO, was focused on wresting power back from AOL to the Time Warner camp—but didn’t wish to confront Steve Case himself—it was Bewkes who wielded the gun. Bewkes had learned of the merger along with the rest of the world on that January day, when the Internet entrepreneur in a coat and tie and the normally buttoned-down Levin in an open-neck shirt made it known. Despite the applause of Wall Street, savvy executives on HBO’s business side, such as John Billock and Bill Nelson, who replaced Albrecht as CEO, ran the numbers and were deeply skeptical. They started selling their stock.
“He projects an absence of panic and fear.”
—David Chase, creator of The Sopranos
As AOL’s stock went south in the months before the deal was finalized, Bewkes urged Levin to cancel it. “Shouldn’t we be paying the breakup fee?” Bewkes asked his boss, pointing out that the numbers and rationale were becoming less and less attractive, and they could extricate themselves for a mere $3.8 billion. But Levin—who was convinced that he was a visionary and liked to boast, “I have iron balls”—wouldn’t hear of it. Bewkes tried to be a good soldier, meeting with counterparts at AOL to discuss how the companies could best be fit together, but he seethed at their attitude of patronizing arrogance—new-media wunderkinds lording it over old-media has-beens—an attitude that, oddly, persisted even as the problems at AOL became increasingly apparent.
By the time of the Bewkes-Case contretemps in the spring of 2002, Levin had already been forced out as CEO. A year after the merger, Bewkes sat impatiently at the meeting of AOL Time Warner’s senior management while Case lectured the group about his latest rosy scenario of world domination in the 21st century, his enthusiasm for buzzwords like “convergence” and “synergy” undiminished by AOL Time Warner’s sagging fortunes. Finally, Bewkes had heard enough. “I’m tired of this,” he snapped at Case, according to Stealing Time, Alec Klein’s 2003 book about the merger. “This is bullshit. The only division that’s not performing is yours. Every one of us is growing, making the numbers. The only problem in this construct is AOL.”
It was an “Emperor Has No Clothes” moment, and Case was shocked into silence. According to Klein, Bewkes’s surprise attack had the prior approval of Parsons. In due course AOL exec Bob Pittman was purged as Parsons’s No. 2, and Case eventually followed Pittman out the door. Bewkes and Don Logan, another Time Warner loyalist, stepped in to oversee the company’s various divisions under Parsons’s stewardship.
Today, Parsons denies that he put Bewkes up to the hit. “I don’t put people up to stuff, but I don’t hold them back either—if you get the nuance,” Parsons says. “It isn’t as though I didn’t know what Jeff thought and what other people thought. There are ways of communicating to people that you’re trying to run an open shop and people should get their feelings out on the table so we can deal with them … After regime change, I think a lot of people felt unleashed—not because I unleashed them but because they felt they could speak their piece with a greater sense of security.”
The 59-year-old Parsons deserves praise for “calming the waters after a catastrophic debacle,” says Gordon Crawford, portfolio manager of the Los Angeles–based Capital Research Global Investors, which at various times has been Time Warner’s largest institutional shareholder. “Basically, people in the company trusted Dick when nobody trusted anybody.” Parsons tried to clean up the mess. He settled various shareholder lawsuits and paid fines to dispose of charges of fraud, accounting and reporting violations brought by the SEC and the Justice Department.
With Bewkes’s help, Parsons also sold off Warner Music and the book-publishing unit of Time Inc., and in early 2006 beat back corporate raider and stockholder Carl Icahn (who retained the consulting services of investment banker Bruce Wasserstein, chairman of Lazard Frères & Co. and the owner of this magazine) and his plan to carve the company into four different units.
Icahn’s critique didn’t win the day, but it remains the public template for whatever options Bewkes might have to deconglomeratize the company further. “Making the company smaller, in my mind, wouldn’t be a bad thing,” says a longtime executive from a rival media company. “Also cutting corporate overhead. They run heavy-duty. Time Warner is a place that has built up a lot of bodies.”
But mostly he just has to make a move. “He knows he’s doomed if he doesn’t do something,” says the executive. “I don’t believe that there are that many clever options that people haven’t already thought about or discussed.”
A prominent media investor, with whom Bewkes occasionally shares his thinking, says, “I think Jeff has a very strong view about where the company should be going, and he gets very frustrated with the lack of strategic policy in recent years. I think he can’t wait to get his shot at reshaping the company.” For instance, this analyst says Bewkes believes Parsons was far too accommodating to Icahn during the proxy fight of 2005–6 and wasted resources on the stock buyback (with no sustained impact on the price)—money that could have been better spent making a strategic Internet acquisition, much as Rupert Murdoch did when he bought MySpace for News Corp. “They might have bought a MySpace or a DoubleClick or an aQuantive, or bought two or three of those companies and had a much stronger inherent growth engine. Instead, money was foolishly squandered … Jeff thinks Dick got rolled.”
But Edward Adler, the Time Warner executive vice-president for corporate communications, says, “This characterization of Jeff’s opinion of our share-repurchase program is completely off base. Jeff strongly believed in the stock buyback throughout the Icahn period.” He points out that, during the accelerated buyback, the company made “more than $15 billion in strategic acquisitions including Adelphia, Court TV (now truTV), Claxson TV stations, and the companies that now make up the core of AOL’s Platform-A advertising business with Adtech, Tacoda, Lightningcast, Third Screen Media, and Quigo.”
In any case, Bewkes’s choices are both limited and terrifically complex. Each alternative sets off a dizzying series of tax, debt, and strategic implications, all while trying to anticipate where to invest for growth. And who knows? After all, the AOL deal was supposed to be a way to drive Time Warner’s media properties into the digital age, while driving AOL’s subscribers into the world of broadband access through Time Warner’s cable. Seemed like a great idea at the time.
“He knows he’s doomed if he doesn’t do something,” says a longtime rival media executive. “I don’t believe that there are that many clever options that people haven’t already thought about or discussed.”
The most obvious of the much-discussed possibilities might be selling AOL’s remaining subscriber business. This is, after all, where the trouble started: The dominance of the service in 1999 is what propelled the merger in the first place. Today, it depends on a dwindling number of subscribers who prefer the simplicity and security of access through AOL.com (including e-mail), though it’s been converted to a free, ad-based portal.
The other AOL Internet properties are doing better. Time Warner owns MapQuest, Moviefone, the gossip and Web-video site TMZ, and dozens of blogs. Still, after initial ad-revenue growth of 40 percent in 2006, AOL’s revenues have started to flatten.
Another of AOL’s synergies with Time Warner was to sell subscriptions to Time Inc. magazines, and capitalize on their formidable journalism brands. But despite having successful Websites like People.com, Golf.com and FanNation.com, and selling more print ads than any other company, Time Inc. is struggling with a post-print future. The media investor notes, “I think his druthers over time is to put a bunch of debt into Time Inc. and spin off what is basically a nongrowth asset.” But the problem with unloading Time Inc. is that the tax hit would be enormous.
As for Bewkes’s plans, the analyst says, “What he should do and what he will do is spin off cable. I think that’s his first priority.” The mammoth distribution business accounts for about a third of the company’s net income but will inevitably require billions in capital outlays as it faces stiffening competition from the telecoms and satellite providers. In any case, many analysts on Wall Street have long since given up on the idea that the integration of content and distribution is a surefire path to success in the media business.
In some scenarios, Time Warner could just end up being a movie studio and cable-television company: an all-Hollywood entity, and a very large and successful one at that. Which could set off another big deal. It could be combined with NBC Universal, which is owned by General Electric, either in partnership or sale.
Reports in the business press have it that G.E. might put NBC Universal on the block after the 2008 Olympics. But the dealmakers of Wall Street also seem intrigued by the possibility of G.E.’s buying a future cable-free version of Time Warner. As another well-known media investor put it, “There’s two big studios, which fit nicely. If you look at a lot of NBC’s hit shows, they come from Warner Bros. Television anyway.” The only big overlap would be with CNN and MSNBC. But both have strong Internet businesses.
Logan jokes mirthlessly, “If I were Jeff, I would follow Dick’s advice—I would go ahead and shoot myself.”
Bewkes, for his part, has good reason to be gunning for someone. He’s not an anodyne suit: Bewkes didn’t hesitate, for instance, to leap into a spirited argument with conservative Supreme Court associate justice Antonin Scalia, when he happened to be seated next to the intellectually intimidating Scalia at a Manhattan dinner party in November 2005. Scalia was patiently explaining to Bewkes, a nonlawyer, why the correct way to interpret the Constitution was to employ the analytical methods of “originalism,” a rarefied legal theory in which jurists must divine the intent of a statute based on how reasonable people are likely to have understood the statute at the time it was enacted. “That’s bullshit, isn’t it?” Bewkes puckishly suggested. “Because you’re really not acting as a judge, you’re being a historian.”
Like many of Time Warner’s other top executives, to say nothing of thousands of lower-level employees, he had received much of his compensation over the past seven years in awards of stock and options. While Bewkes was in charge, the estimated value of HBO rose fivefold to more than $10 billion, and he was amply rewarded in stock. At one point in early 2000, he could have cashed out his options for more than $150 million, as he later told an executive from a rival media conglomerate. But he didn’t. Between 2001 and 2002 (when the price was more than twice today’s), Parsons sold $35 million in stock and bought a vineyard in Tuscany. Beginning in 2000, Case sold $156 million and Pittman unloaded $94 million in stock. But Bewkes held on, believing that it would have sent the wrong signal for a corporate biggie to be seen as dumping. Levin, too, rode his shares into the ground, apparently convinced they would recover and his vision would be vindicated.
Today, Bewkes figures his losses in the tens of millions of dollars. “What the fuck have I been working for all these years?” Bewkes complained bitterly to a friend.
“For everyone in the company the last four years with a strike price of seventeen bucks and change, their options are under water, and it’s put everyone in a very foul mood,” says an executive from the magazine division. “That kind of internal malaise is a problem.” But inside the company, Bewkes wins points for having suffered himself. And in contrast to the well-liked Parsons—who jokes that “the major difference between the two of us is he’s smarter, I’m funnier”—Bewkes likes to operate outside of the pomp and ceremony of the corporate kingdom, avoiding publicity (while carefully courting the financial press), and minimizing his use of perks like limos and corporate jets.
Bewkes’s friend Robert Shaye, the co-chairman of the Time Warner subsidiary New Line Cinema, says, “He’s a little bit hard to read in an interpersonal sense, but I don’t count that as being any serious liability. You don’t have to be a ‘hail fellow well met’ to be up to the challenge.”
Few suffered personally from the merger more than Shaye, who by some estimates lost hundreds of millions of dollars as the stock plummeted and he kept buying more shares on the way down. “I believed the snake-oil salesmen,” he says ruefully.
“I’m not going to betray any confidences, but Jeff is very anxious to be a creative businessman in the sense of exploiting and energizing the real assets of Time Warner,” Shaye says. “He’s going to do things that are going to be recognized as astute and clever moves to fortify the best assets of this company and to rid itself of operations that he feels—certainly with the board’s cooperation—are not in the best interests of the corporation.”
Who Came Before: A Short History of Time Warner CEOs
Steve Ross, CEO
Jan 1990– December 1992
Nicholas J. Nicholas, Co-CEO (with Ross)
May 1990–February 1992
Gerald Levin, CEO
December 1992–May 2002
May 2002–December 2007