HBO
AT&T has been the proud owner of HBO for less than a month, and it is already considering an overhaul that would see HBO produce more video that can compete for the attention of smartphone users. AT&T wants to boost revenue both in advertising and subscriptions, even if that means upending HBO’s longtime strategy of producing a relatively small number of high-quality shows.
John Stankey, an AT&T executive who is now CEO of the company’s WarnerMedia division, formed after last month’s acquisition of Time Warner Inc., described his vision in an hourlong “town hall meeting” with 150 employees. Audio of the meeting was obtained by The New York Times.
“It’s going to be a tough year,” Stankey said, according to the Times article. “It’s going to be a lot of work to alter and change direction a little bit.”
The talk, held at HBO headquarters in New York City, was hosted by HBO CEO Richard Plepler. Both Stankey and Plepler acknowledged that producing more shows could lead to a drop in quality, but they said they hope to produce more without sacrificing HBO’s standard of excellence. Stankey said that HBO needs to attract more subscribers and convince subscribers to spend more time watching HBO, the Times report said. That means HBO must produce more content, “transforming itself from a boutique operation, with a focus on its signature Sunday night lineup, into something bigger and broader,” the Times wrote in a paraphrase of Stankey’s remarks.
HBO must compete with smartphones for people’s attention, Stankey said in this exchange with Plepler:
“We need hours a day,” Mr. Stankey said, referring to the time viewers spend watching HBO programs. “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.”
Continuing the theme, he added: “I want more hours of engagement. Why are more hours of engagement important? 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.”
AT&T wants more investment, more profit
HBO was already thinking about adapting HBO content for mobile devices more than a year before the merger was approved and finalized.
“Think about things like Game of Thrones,” AT&T CEO Randall Stephenson said at a telecom conference in May 2017. “In a mobile environment, a 60-minute episode might not be the best experience. Maybe you want a 20-minute episode.” Instead of showing full-length episodes on all devices, it might be best to “curate the content uniquely for a mobile environment.”
In the more recent post-merger meeting described by the Times, Stankey said that AT&T plans “stepped-up investment” for HBO, a notion that Plepler approved of. That led to this exchange:
“Also,” Mr. Stankey said, “we’ve got to make money at the end of the day, right?”
“We do that,” Mr. Plepler responded, to scattered applause.
“Yes, you do,” Mr. Stankey said. “Just not enough.”
“Oh, now, now, be careful,” Mr. Plepler said.
HBO has made nearly $6 billion in profit over the past three years, while devoting more than $2 billion a year to programming, the article said.
HBO has 40 million subscribers in the US and 142 million worldwide, but Stankey said that AT&T intends to make HBO “a much more common product.”
“More is not better”
Plepler said that HBO’s current strategy “is not going to be sustainable going forward.”
“I’ve said, ‘More is not better, only better is better,’ because that was the hand we had,” Plepler said. “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.’”
How will AT&T produce more shows without reducing quality? Stankey said that AT&T and HBO will have to “figure [that] out.”
“You’ve earned the dynamic amongst your customer base that when you put a new piece of content out there, people will try it, just because they trust you’re going to be putting something in front of them that they might like,” Stankey said. “We now need to figure out how to expand the aperture of it without losing the quality.”
Stankey reiterated that the first year under AT&T’s ownership could be tough for HBO employees. “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,” he said.
The first year under AT&T ownership is a time that HBO employees will “be very fond of” when they look back on it, Stankey said. But, he added, “it’s not going to feel great while you’re in the middle of it.”
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