FOX Fox Corporation

By Keach Hagey 

Jeff Bewkes, the chief executive of Time Warner Inc., built his reputation on shrinking the media conglomerate down to focus on TV and film content by unraveling the failed marriage with AOL and breaking free from the Time Warner Cable distribution business.

Now, before exiting stage left, he is writing his own legacy with the $85 billion sale to AT&T Inc. that will reunite Time Warner's coveted content with a vast distribution network that spans satellite TV and mobile phones.

The price -- $107.50 a share, a 36% premium over where Time Warner's stock had been trading in the middle of last week -- represents a triumph for Mr. Bewkes, two years after he walked away from an $85-a-share offer from 21st Century Fox Inc.

But the sale to AT&T also represents a strategic departure for Mr. Bewkes, who spent his nearly nine years as CEO slimming down the onetime media behemoth, unwinding the AOL merger and spinning out Time Warner Cable and Time Inc. The three businesses that remained -- HBO, Turner Broadcasting and Warner Bros. -- are focused solely on video content. In lieu of acquisitions, Mr. Bewkes focused on containing costs and buying back stock.

A cerebral Stanford M.B.A. known for his financial acumen, Mr. Bewkes implemented a strategy shaped in part by scars from the disastrous AOL-Time Warner merger that closed in 2001.

While the ill-fated deal carried lofty promises of new online distribution methods for Time Warner's sprawling cache of content, it ultimately left shareholders in the combined company -- including employees such as Mr. Bewkes -- in a lurch after AOL's business collapsed.

Mr. Bewkes said a big difference from the AOL days is that distribution has become even more central to giving consumers what they demand from media. They want more flexibility in the packages they can buy and the platforms they can accesses content from.

Much has changed in the media landscape in recent years.

The rise of Netflix Inc. and YouTube and growth of so-called "skinny bundles" -- smaller, cheaper packages of channels -- has chipped away at the longtime engine of media companies' profitability: the ever-rising fees they could once depend upon from pay-TV distributors.

Time Warner first attempted to meet the challenge from more nimble streaming competitors by pioneering so-called "TV Everywhere," which allowed viewers to watch its content on desktops, mobile devices and streaming video players -- but only if they proved they were pay-TV subscribers. The model's rollout across the industry was frustratingly slow, Mr. Bewkes often noted. Meanwhile, Netflix, Amazon Prime Instant Video and Hulu's market share exploded.

More recently, Time Warner has tried to meet the challenge by launching its own direct-to-consumer products, such as the broadband-delivered HBO Now.

In a conference call Saturday night, Mr. Bewkes cast Time Warner's tie-up with AT&T as a continuation of his quest to give consumers more of the shows they want, when and where they want them.

In an industry whose leaders are often described as "moguls," Mr. Bewkes cut a different figure. He grew up in Darien, Conn., the son of a businessman, and spent his days at Yale University studying philosophy and hanging out with the artistic crowd. His first media job was making documentaries for NBC News. But after getting his M.B.A., he went into the business side, joining a fledgling HBO in 1979 following a stint at Citibank. He never left, steadily rising through the ranks at HBO to CEO, and then to CEO of its parent company in 2008.

After the deal closes, Mr. Bewkes, 64, said he would stay on for an interim period to help with the transition.

If he exits as part of the change in control, he could stand to walk with what today would be worth almost $95 million, including the value of his stock, according to regulatory filings. However, he has said he plans to stay on at least until the deal closes, expected at the end of 2017, and perhaps beyond.

Unlike many companies, Time Warner doesn't have so-called golden parachute payments for executives if they are dismissed as part of an acquisition. Instead, Mr. Bewkes would get almost $24 million in options and other benefits like the maintenance of his life-insurance plan. Plus, he owns about 658,000 shares of Time Warner, which are valued by AT&T's cash-and-stock offer at about $71 million.

Not an ego-driven builder, Mr. Bewkes turned Time Warner into a takeover target by spinning and slimming the once far-flung conglomerate.

When 21st Century Fox came calling in 2014, attracted by the HBO crown jewel and synergies between the similar companies, Mr. Bewkes and his team were unimpressed by both the form and the content of the offer -- presented at a lunch with Fox's then-Chief Operating Officer Chase Carey.

Time Warner rejected the approach. At the same time, they made clear that should another suitor come along from the tech or telecom worlds with a better price and more cash, it might be entertained.

Time Warner then made a bold pitch to investors that it could top Fox's $85-a-share price on its own. It surprised the media world by announcing the direct-to-consumer HBO Now. While the stock did push past that level for a time, it spent much of the past year well below that, dragged down by sector-wide concerns about cord-cutting.

Mr. Bewkes faced pressure from some investors to consider breaking up the company and potentially spinning off HBO, but he and the Time Warner board steadfastly refused. If a buyer wanted Time Warner, they were going to have to take the whole thing.

Write to Keach Hagey at keach.hagey@wsj.com

(END) Dow Jones Newswires

October 23, 2016 15:42 ET (19:42 GMT)

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