At Time Warner, Local Content, Global Profits

One of Jeffrey Bewkes' favorite movies these days is Two Ear Chicken, a low-budget German tale about a philandering tabloid journalist. No, the Time Warner (TWX) CEO hasn't become a connoisseur of obscure German cinema. His company produced the romantic comedy, and it is the most popular German film of 2009.

Welcome to what Bewkes likes to call the New Time Warner. Recently slimmed down—so long, AOL (AOL) and Time Warner Cable—the New York media giant is looking for growth overseas. Bewkes believes it is no longer good enough simply to export films like The Dark Knight or TV shows like The Sopranos. He wants to produce local programming for audiences around the world. Last year, Warner Bros. (TWX) released 19 movies for the German market. "We need to get scale in these countries," says Bewkes, "and one way to do that is to ramp up local productions."

The Time Warner chief is a little late to the party. News Corp. (NWS) and Viacom (VIA) have been hooking up with local entertainment companies around the world for years. With AOL and the cable business gone, Time Warner this year will generate 30% of its revenues overseas, up from 17% before last year's spinoffs. Olaf Olafsson, who runs global operations from New York, says he and Bewkes knew the "one-shoe-fits-all" export model wasn't going to work. "We'd have to tailor-make [films and TV] to fit the markets."

One way to do that is to buy production companies. But Bewkes is a famously cautious dealmaker, especially in the wake of his disastrous 2008 acquisition of British social network Bebo, since offloaded with AOL. So far, his acquisitions have been modest. In December, Time Warner's Turner Broadcasting System shelled out $126 million for a 92% stake in NDTV Imagine, a Hindi-language channel based in New Delhi. In March, Time Warner paid $240 million for a 31% stake in Central European Media Enterprises (CETV), a Prague-based collection of TV networks that reaches 97 million people in seven countries in Eastern and Central Europe. Both, Bewkes says, will help bring an "authentic feel" to Time Warner's local productions.

He points to Germany as a template for other countries. There, the company asked Willi Geike, an executive responsible for getting Warner Bros. movies into German cinemas, to scout potential production partnerships. Geike persuaded actor-director Til Schweiger (Germany's George Clooney) to direct and star in a series of films featuring Ludo, the tabloid journalist, and Anna, his kindergarten teacher wife. Two Ear Chicken (Zweiohrküken in German) was released in December and has grossed north of $41 million. That's a pittance next to a Hollywood blockbuster like Sherlock Holmes (from Warner Bros.) which has taken in $390 million since its December release. But Bewkes says he paid no less attention to the daily grosses for Two Ear Chicken and sees its success as validation of his global strategy.

Will the wary Bewkes approach get him the international scale already enjoyed by rivals like Rupert Murdoch's News Corp. and Sumner Redstone's Viacom? On Feb. 3, Bewkes told analysts that the international cable TV businesses will generate $400 million in operating profits this year and claimed that will beat out his competitors. Still, if Bewkes' global strategy is to work, says Sanford C. Bernstein & Co. analyst Michael Nathanson, the Time Warner boss may need to think bigger.

    Before it's here, it's on the Bloomberg Terminal.