Any new owner gets itchy to begin renovations, but AT&T executive-turned-WarnerMedia overseer John Stankey gave assurances after the merger that he’d preserve the structure of HBO. However, according to the New York Times, which obtained audio from a town hall meeting Stankey held with HBO staffers July 6, what he has in mind isn’t “This Old House;” it’s “Extreme Home Makeover.”
HBO churned out a reported $6 billion in profit over the past three years, but as Stankey told his new employees, that’s “not enough.” Nor is its subscriber base, or its viewer engagement.
“We need hours a day,” Stankey 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.”
A few problems suggest themselves, starting with: None of this is HBO. WarnerMedia’s TV portfolio is actually quite broad when you consider TNT, TBS, CNN, TruTV, TCM, Cartoon Network, Adult Swim, 50 percent of The CW, DC Entertainment, and more. HBO’s pitch to viewers — and to the creative community — is while competitors may have quantity, it offers quality. That ethos is reflected in everything from its hallmark Sunday-night lineup to the attention the network pays to its A-list creators.
“If you have 50 kids, you’re not going to every soccer game,” HBO programming president Casey Bloys told the Wall Street Journal earlier this year. “We go to every soccer game, and we’re the snack parents at every soccer game. That’s how we treat our talent.”
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Based on Stankey’s comments at the town hall, which took the form of an interview with HBO CEO Richard Plepler, those metrics hold little interest. “As I step back and think about what’s unique about the brand and where it needs to go, there’s got to be a little more depth to it, there’s got to be more frequent engagement,” he said.
As the New York Times pointed out, no one uttered the dirty word of “Netflix” at the town hall — but they didn’t have to. Engagement is the native tongue of Netflix, which debuts countless new shows and movies every week. Some are acquisitions, some are homegrown; some are brilliant, others are an embarrassment. Making HBO reflect that sensibility would seem to require no less than DNA splicing, which would be crushingly expensive: Netflix is on track to spend $13 billion on content this year.
Exactly how Stankey intends to get there is unclear, but he took no pains to comfort HBO employees who might be having anxiety attacks as their new boss suggested they’re living in a teardown. “It’s going to be a tough year,” Stankey reportedly said. “It’s going to be a lot of work to alter and change direction a little bit … You will work very hard, and this next year will — my wife hates it when I say this — feel like childbirth. You’ll look back on it and be very fond of it, but it’s not going to feel great while you’re in the middle of it.”
One reason his wife may hate that metaphor is, as many women have reported, childbirth often hurts like hell; “not going to feel great” doesn’t enter into it. Broadening HBO with volume is a slap in the face to the pay cabler’s very identity. HBO has always operated differently than its competitors, developing plenty of projects — sometimes for years, much to the chagrin of writers — while cherry picking a handful to go to pilot and then series.
“In a crowded marketplace like we’re seeing now, the more that your brand stands for something I think that becomes more even more important,” Bloys told reporters last summer. “If HBO is putting out a show, you have a certain expectation. So to some extent, the volume of shows [at other outlets] is actually helping us because it’s hard to figure out what to watch and what to prioritize. If you have a brand that at least gives the consumer some idea of what they might expect, it makes the decision of what to watch easier.”
Stankey promised to increase HBO’s programming budget, though to what degree was unclear. In what seemed to be a masterstroke of understatement, he told the HBO executives at the town hall: “I do believe there needs to be stepped-up investment.”
Even Plepler was unable to resist the instinct for sarcasm. “Let’s give him a hand for that simple sentence!” he replied. “That simple sentence deserves a hand!”
Whatever funding Stankey is willing to commit, it can’t compete with Netflix: Unlike HBO, it doesn’t have to concern itself with posting a profit.
“HBO is a profitable company,” FX Networks CEO John Landgraf said earlier this year. “It has a very substantial programming budget, but it’s still within the realm of rationality. Netflix is a business that loses money. They spend $2 billion a year more than they take in. And so to me they’re actually dumping content onto the market at below cost in order to take market share and so that does bother me.”
According to the New York Times, Plepler admitted that Stankey convinced him that they need more content to be better. And given the fiercely competitive state of TV, there’s some truth to that. While “The Sopranos” altered the landscape, it’s been nearly 20 years since HBO could change the conversation on the basis of one show.
Today, HBO has a massive hit in “Game of Thrones,” and although that show is about to end, at least one (and quite possibly more) spin-off is in the works. Shows like “Veep,” “Silicon Valley,” “Big Little Lies,” “Curb Your Enthusiasm,” “Insecure,” “Barry,” and “Westworld” remain in the zeitgeist.
But with FX, AMC, Showtime, Starz, Netflix, Hulu and Amazon, the competition for high-end dramas is nearly endless. The market is too fractured for HBO to be the dominant player in longform, comedy specials, and documentaries.
And now, there’s the real possibility that Netflix, thanks to its volume, may surpass HBO as the leader in Emmy nominations on Thursday. “HBO is still amazing, but now they have to compete for projects and they lose sometimes for various reasons, all of which they are not used to dealing with,” an insider said.
HBO has made changes, particularly after the launch of its standalone HBO Now service, by strategically acquiring franchises like “Sesame Street” to broaden its offerings. Based on Stankey’s comments, that’s not nearly enough.
“The goal is to become HBO faster than HBO can become us,” Netflix chief content officer Ted Sarandos once famously said. HBO has more of a running start than others in the game, including Apple — which is attempting to build a competitor from scratch. Ideally, Stankey will increase HBO’s programming budget to a manageable level, allowing Plepler, Bloys, and company to get more of their extensive development roster on the schedule.
Stankey has some experience in entertainment, as AT&T has been seriously in the game since acquiring DirecTV in 2015. Yet he’s still a Hollywood outsider, a telecom exec learning that money doesn’t always guarantee quality, or success.
HBO currently stands for quality. Build on that properly, and HBO will be a key media brand long into the future. Attempt to match Netflix in volume, and risk ruining the HBO brand. HBO is WarnerMedia’s premiere property, and Stankey is key to whether it builds up home equity — or winds up underwater.