Time Warner plots next moves on video on demand, Netflix

With digital technology rapidly transforming home entertainment, Time Warner Inc. Chief Executive Jeff Bewkes is preparing aggressive moves to speed up the delivery of movies directly to the home, as well as to challenge fast-growing rental services Netflix and Redbox.

In a conference call with analysts Wednesday to discuss the media company’s financial results, Bewkes talked at length about “digital transition in film,� which he said was “arguably the area of our business going through the most change right now.�

The CEO reiterated previous statements that, beginning in the second quarter, Time Warner’s Warner Bros. studio will begin offering movies 60 days after they have been released in theaters — before they are available for purchase on DVD — via cable and Internet video on demand.

Bewkes didn’t mention a price, but so-called premium VOD is expected to cost $30 to $60, according to people familiar with the matter.

Premium VOD has been a cause of consternation in the entertainment industry as movie theater chains worry that it could undercut ticket sales. Studios, however, believe it could help them capture revenue during a time when recent releases are otherwise unavailable.

Bewkes also continued his public campaign challenging Netflix and Redbox, the fast-growing rental services that have come to dominate that industry. He hinted at extending the time period that the two companies have to wait for Warner Bros.’ releases (currently 28 days), a move that would be aimed at boosting DVD and download sales, as well as demanding higher payments from them.

“This year we will determine whether to lengthen the window for Redbox and Netflix and whether to increase how much we charge them for DVDs,� Bewkes said.

In response to a question from analysts, Bewkes said “a clear acceleration in consumer usage� for Netflix and Redbox “makes it a good time for us to re-evaluate the terms [of deals].… In our view, the current pricing in windows is not really commensurate with the value those kinds of availability of our films are extracting.�

Bewkes also said that Warner Bros. would look to pour even more money into future big-budget “event films� along the lines of the “Harry Potter� series, which ends this summer, and June’s upcoming superhero adaptation “Green Lantern.�

“At Warner Bros. we’re stepping up our levels of investment [and] focusing even more of our resources on event films,� he said, adding that those types of pictures “tend to be more consistently profitable for us than smaller movies.�

For the quarter ended Dec. 31, Time Warner reported $769 million in net income, up 22% from the same period in 2009, on $7.8 billion in revenue, up 8%.

At Warner Bros., revenue increased 10% to $3.6 billion and operating income declined 2% to $427 million. For the year, Warner said it benefited from higher TV licensing fees and a stronger theatrical release slate but was hurt by declining home video revenue.

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