The Albanian Army Is Doing a Great Job, Says Time Warner CEO

It's been two years since Time Warner (NYSE: TWX  ) CEO Jeff Bewkes compared Netflix (NASDAQ: NFLX  ) to the Albanian army and an overconfident chimp. Back then, Bewkes thought that Netflix was an overhyped little upstart that wouldn't change the world anytime soon.

But that was then, and this is now. In this week's earnings call, Bewkes disclosed that on-demand services led by Netflix and Amazon (NASDAQ: AMZN  ) Prime accounted for $350 million in 2012 revenue -- content value that Warner would otherwise never have seen materialize. With this substantial cash contribution from Netflix and Amazon, Bewkes changed his tune considerably.

Now, he sees digital streaming services "fitting into the network ecosystem very well." Not only has his company already struck fresh content deals with both Amazon and Netflix in this young year, but "there's some more being discussed," as well.

He pointed to Netflix's long-term agreement with Walt Disney (NYSE: DIS  ) as evidence that "there's some value there for movies in the VOD world." This revelation may change how he runs his own HBO and Cinemax services in coming years, with a keen eye to online monetization. If online services are good enough for the House of Mouse bellwether, you really should expect the other major studios to follow suit.

And here's his new Netflix view in a nutshell: "Let's go over and give a little credit to Netflix. They're doing a great job," particularly in helping customers find the right content in a vast library of films and TV shows.

Bewkes still believes that HBO has a serious head start on Netflix in original programming, which he sees as the real selling point for video services in the digital era. Even if House of Cards turns into an Emmy-winning phenomenon, HBO already owns dozens of proven hit series. It'll take some doing to catch up.

I think it's great to see the digital distribution model gaining traction even with staunch skeptics like Jeff Bewkes. The business model is starting to make sense to Hollywood's traditionalists. Throw in the recent elevation of Warner's digital distribution guru, Kevin Tsujihara, to the CEO position of the Warner Bros. studio, and I think we'll see this company play a lot more digital ball in the years to come.

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