Warner Bros. Chief Sees Only Boundless Opportunities in Distribution

What direct impact would the America Online-Time Warner merger have on the Warner Bros. movie and television studio?

According to Barry Meyer, who was installed as chairman and chief executive of the major Hollywood studio last August, little or nothing might change operationally, but strategically the opportunities are boundless.

“The only impact for us is positive on all fronts,” said Meyer, who took over the studio reins when longtime partners Bob Daly and Terry Semel resigned in July after nearly two decades.

“Warner Bros. is the content-creating heart of the company. We make movies, TV programs and a lot of original Internet content. This has increased our spectrum geometrically, increased our platform to distribute proprietary creative content enormously.”

Meyer was reluctant to discuss specific effects on Warner Bros.’ various entertainment businesses--which along with the movie and TV operations include a home video division, retail stores and an online service.

But he said the merger would have no effect whatsoever on the decision-making process of what movies or TV shows get made at Warner Bros.

He said many of the creative people with whom the studio does business in movies and TV have expressed interest in producing product for the Internet as a next-generation distribution outlet.

“It’s on everybody’s mind,” Meyer said. “As you go into a broadband world, more and more content is going to be distributed over the Internet.”

Disney Studios Chairman Joe Roth said that although the emergence of the Internet will not suddenly change the kinds of movies Hollywood turns out, he suggested that “at some point, content might get reconfigured as to how it fits into the new distribution systems.”

“There may be a bigger drive to do different forms and lengths of storytelling as you try to fill the distribution channels,” Roth said.

Certainly, entertainment production companies such as Imagine Entertainment and DreamWorks SKG are thinking along similar lines. In October, the two firms announced plans to launch Pop.com to produce and broadcast content created exclusively for the Internet in the form of three-to-five-minute shorts--live action, animated or interactive.

“This validates the idea that content has a value on the Internet,” said producer and Imagine chief Brian Grazer, who along with his director partner, Ron Howard, is now in the Internet business with DreamWorks’ principals, Steven Spielberg, Jeffrey Katzenberg and David Geffen.

“I don’t think this will have a direct impact on the movie business,” said Jeffrey Berg, chairman of International Creative Management, who sits on the board of Oracle. “What it changes is the downstream distribution possibilities of movies over the Internet as a subsequent platform. . . . It becomes a more important add-on.”

Like most entertainment companies, Time Warner has been struggling to establish a presence on the Internet through various means, including creating original programming.

Last November, Time Warner launched its entertainment Web site, Entertaindom.com, drawing on programming from the Warner Bros. film studio, Warner Music Group and Time Inc.’s Entertainment Weekly magazine as well as outside companies.

It is unclear how or if the AOL merger would affect Entertaindom and whether its mandate would change.

Naturally, combining with AOL would give Warner Bros. even more opportunities to further leverage and promote its own product and exploit its brand on the Internet.

As last year’s huge box-office success “The Blair Witch Project” proved, the Internet can be a very effective tool for marketing movies.

Wall Street analyst Christopher Dixon of PaineWebber said that for Warner Bros., “the Internet now becomes a much more important promotional outlet for its films and TV shows and to access younger talent who spend more and more of their time on the Internet.”

Meyer said the studio already enjoys “a strong relationship with AOL” to promote its entertainment programming, but “we will continue to do much more.”

The studio chief said it was “visionary on AOL’s part to realize that content was as critical to them as it is.” Meyer added that “distribution and proprietary creative content will be the new model. . . . They need the content and we need the kind of distribution their company affords us in the new digital world.”

One of the most obvious and immediate benefits of the merger to Warner would be in e-commerce, which Meyer said “catapults us” to a new level by giving the studio the infrastructure it lacked.

“It would take us years to replicate the equivalent form of e-commerce,” Meyer said.

Does the AOL-Time Warner merger put increased pressure on other entertainment companies to hook up with a major technology outfit?

“This kind of transaction always causes everyone to reexamine their Internet/broadband strategy,” Dixon said.

“Do we feel we are competitively disadvantaged over the near term?” mused MGM’s Vice Chairman Chris McGurk. “No. But it does put pressure on everyone to carefully consider their options and to do our homework on knowing how a content company might line up with a Web company.”

Daly, who after leaving the entertainment business last summer subsequently became chairman and CEO of the Los Angeles Dodgers, said, “I was blown away when Barry Meyer called me last night and told me about this. . . . It’s a great deal for both companies.”

On a personal note, Daly added, “It makes me most happy that I didn’t sell my stock.”