There are many reasons that AT&T’s merger with Time Warner presented the clear possibility of harming consumers. Somewhere on the list is the possibility of turning the carefully curated, profitable, and beloved HBO into a big-data monster like Netflix. To hear AT&T’s executive in charge of the cable channel tell it, that’s exactly what’s planned for the future.
Last month, AT&T won its legal battle with the Department of Justice and promptly completed its $85 billion acquisition of Time Warner. It’s now the proud owner of DC Comics, CNN, and many other popular media properties. HBO is one of the most prestigious and successful facets of the division that has now been renamed as WarnerMedia—leave it to corporate America to look at something that works well and immediately decide it needs to change. The New York Times has reportedly obtained audio of a recent conversation between HBO’s longtime CEO, Richard Pepler, and his new boss, John Stankey, that was privately conducted for employees of the network—it is equal parts uncomfortable and ominous.
It was only a few weeks ago that Stankey was painting a picture of AT&T taking a hands-off approach to HBO, but behind closed doors, he’s ringing alarm bells that the company needs to catch up with the ‘throw anything at the wall’ approach of Netflix. Stankey warned employees that “it’s going to be a tough year,” as AT&T retools as operations. Plepler, meanwhile, tried to maintain a cheery disposition and pushback on some of the more unsettling remarks his boss made.
Part of AT&T’s argument for the merger was it needed more content to compete with the rising giants of streaming. HBO manages to hold its own pretty well in the TV streaming market despite having a wildly different approach than rivals like Netflix and Prime Video. The 45-year-old network sticks with what works: maintaining a rotating library of feature film offerings and mostly focusing on producing high-quality content for its big Sunday night audience. For Stankey, that idea is dead. It’s not enough to make money anymore, greedy executives demand “engagement.” From the Times report:
- “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.”
One can imagine Pepler grinning and nodding as he thinks about the record-setting number of Emmys HBO has won and the huge profits it pulls in while Stankey says that the network needs “more depth.” And just as a vein on Pepler’s forehead threatens to explode, Stankey says something any network exec likes to hear: “I do believe there needs to be stepped-up investment.”
More money to make quality television sounds great, but then Stankey made it clear that there’s no amount of profit that will ever be enough. This exchange is heartbreaking:
- “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.
You see, despite HBO turning a $2 billion annual budget into $6 billion in profits, it’s competing with Netflix, a company that plans to spend $2 billion on marketing alone this year and runs at a loss. Hulu, another direct competitor, managed to lose close to a billion dollars last year. And in Stankey’s maniacal mind, HBO must be more like these losers.