There is something so contemptible about being told by someone who knows nothing about your industry that you need to do better. However, this has been the general reality in Hollywood for the last half century once the studio moguls gave way to corporate conglomerates. Some new corporate owner comes in, puts an MBA in charge of everything, who then tells everyone how to do their job in a more fiscally responsible way. It’s happened countless times before, and it’ll happen a lot over the next couple of years thanks to AT&T-Time Warner’s merger being approved without condition. The people at HBO just got a front row seat to this curious sideshow of corporate speak.

John Stankey

The setting: a town hall meeting in New York.

The participants: WarnerMedia’s new CEO John Stankey, HBO CEO Richard Plepler, and 150 HBO employees in the crowd.

The key pull-quote: Stankey told the audience at one point, “We’ve got to make money at the end of the day, right?,” to which Plepler replied, “We do that.” Said Stankey, “Yes, you do. Just not enough.”

Who’s right?: HBO already has 40 million subscribers stateside and 143 million worldwide, compared to Netflix’s 56 million stateside and 125 worldwide. According to The Financial Times earlier this year, “HBO added the most US subscribers in its history in 2017, propelling revenue and profit growth at its parent, Time Warner. The premium cable channel has struck new distribution deals that are driving expansion at a time when most television networks are losing viewers to competition from Netflix, Amazon and other offerings outside the traditional pay-TV bundle. HBO’s revenue rose 7% to $6.3bn last year, helped by an 11% lift in subscription revenue, the strongest in more than 20 years.”

Not good enough, apparently.

Stankey is the new guy, essentially. After Federal Judge Richard Leon was won over by AT&T’s bold-faced lies, the Time Warner purchase went through and the housecleaning began immediately. Time Warner is now WarnerMedia, and all the old bosses – Time Warner’s CEO, Executive VP, head of marketing and communications – are gone, dismissed with sizable severance packages. Stankey’s the new boss, despite having zero Hollywood experience. He’s an MBA from UCLA who climbed up the AT&T ranks over three decades and proved essentially in both the acquisition of DirectTV and the launch of the DirectTV Now streaming service.

Given that background, much of what he told the town hall makes sense. He doesn’t know anything about making movies or TV shows, but he knows the streaming industry. So, even though HBO leadership has long maintained the key to its success is to feed its audience a carefully curated stream of quality programming Stankey wants them to switch gears and favor quantity now. In other words, be more like Netflix.

“We need hours a day,” he said. “It’s not hours a week, and it’s not hours a month. We need hours a day. You are competing with devices that sit in people’s hands that capture their attention every 15 minutes.”

Why, though? “Because you get more data and information about a customer that then allows you to do things like monetize through alternate models of advertising as well as subscriptions, which I think is very important to play in tomorrow’s world.”

What the boss wants, the boss gets. So, Plepler fell in line, declaring, “I’ve [previously] said, ‘More is not better, only better is better,’ because that was the hand we had. I’ve switched that, now that you’re here, to: ‘More isn’t better, only better is better — but we need a lot more to be even better.’”

Plepler

The good news is since AT&T’s Time Warner deal is a vertical integration there aren’t a whole lot of redundancies between the two companies. As a result, HBO is under no immediate threat of layoffs. In fact, Stankey intends to up their budget, “I suspect if we’re in a situation where we’re going to be investing heavier, that means that there’s going to be more work for all of you to do — and you’re going to be working a little bit harder.”

So, the entertainment industry’s larger push toward scaling up to keep up with tech competitors like Netflix and Amazon has just hit HBO, which already massively expanded its programming in recent years.

The danger, though, is whether or not HBO can sustain such growth without sacrificing its carefully curated brand identity. When Plepler spoke up to defend the network’s beloved and award-winning originals like Big Little Lies and newcomers like Barry and Insecure, Stankey made vague reference to the need to try something new. When Plepler touted the network’s subscription numbers, Stankey dismissively emphasized the need “to move beyond 35 to 40% penetration to have this become a much more common product.”

Reading between the lines: Like Amazon and Netflix’s production departments before them, HBO might be in store for a culture change which leans more toward broadly appealing films and shows. As with Amazon’s recent change in philosophy, this would mean fewer risky bets on weird indie-leaning projects (an HBO specialty) and more safe plays, like endless Game of Thrones spin-offs, which, to be fair, HBO was already going to do anyway. It would be an odd turn of events for the network that already has some of the most-watched shows on TV and regularly wins just about every Emmy possible, but it’s exactly the kind of marching orders you get from a new boss who just wants to see bigger and bigger numbers.

If, however, Stankey simply wants them to keep doing what they’re doing, only more often, and is willing to hire more people to make that happen than HBO can only benefit. That doesn’t seem to be what’s happening, at least not entirely. As Stankey admitted, “It’s going to be a tough year. It’s going to be a lot of work to alter and change direction a little bit.”

To paraphrase HBO’s famous slogan, it’s not TV, it’s AT&T, and what they say goes now. It will be interesting to see just what kind of new direction Stankey has in mind.

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Posted by Kelly Konda

Grew up obsessing over movies and TV shows. Worked in a video store. Minored in film at college because my college didn't offer a film major. Worked in academia for a while. Have been freelance writing and running this blog since 2013.

3 Comments

  1. Let’s be honest, this doesn’t sound good. Not good at all….

    I hate this merger.

    Reply

    1. Apparently, when heard in the context of his full speech with actual audio Stankey’s comments don’t sound quite as alarming:

      https://www.recode.net/2018/7/9/17551270/hbo-att-john-stankey-richard-plepler-transcript-facebook-amazon-netflix

      Still skeptical of him, though. It’s just not a good look. Raise prices right away despite saying they wouldn’t (and now claim the price increase is unrelated). Tell HBO to stop being such dicks about insisting on making so many good shows when they should just be more like Netflix and feed the world content out of a firehouse.

      Reply

  2. […] AT&T To HBO: Be More Like Netflix; HBO to AT&T: Yes, Sir. Whatever You Want, Sir. […]

    Reply

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