Time Warner reported an uninspiring first quarter, with revenue inching up 3% and operating income dipping 13%, partly because of increased spending on programming at its HBO and Turner units. That so-so performance is not surprising. The entertainment company’s management has been on autopilot for the past 18 months, planning to be absorbed by AT&T in a deal whose fate is now before a federal judge. That shows the risk that CEO Jeff Bewkes has taken by holding onto the deal. Yes, he initially negotiated a good price for his shareholders (one that AT&T shareholders will have to pay). But as the closing got delayed by the regulatory review, the damage done to Time Warner of standing still in a rapidly changing industry is increasing.
If the deal does fall through, Time Warner’s board has some options. It’s likely to get approaches from other potential buyers (Apple, for instance). It could break itself up and sell the pieces off. Or it could find a new CEO willing to chart a more aggressive course than Bewkes has pursued. That’s what T-Mobile did after the government blocked AT&T’s purchase of that company in 2011. John Legere, hired in 2012, managed to lift T-Mobile from the doldrums. Perhaps Time Warner needs to start looking for its own John Legere.