Updated Jul 9, 2018 - Technology

AT&T is planning changes to make HBO more like Netflix

HBO sign

Photo: Jaap Arriens/NurPhoto via Getty Images

HBO was the prize horse in the stable of media properties AT&T acquired in its recent purchase of Time Warner. Now, according to audio leaked to the New York Times, AT&T wants its thoroughbred to run faster and harder, all in the name of making even more money.

Why it matters: For all the wrangling over the government's antitrust suit that tried to block the AT&T/Time Warner merger, it's still a big open question whether a buttoned-up telecom company can take the reins of a legendary content producer like HBO without squandering its cultural cachet.

According to NYT, AT&T's plan includes several steps:

Step one is dramatically increasing the amount of content the unit produces.

  • “We need hours a day,” John Stankey, the AT&T exec who now oversees HBO, told employees at a recent HBO town hall meeting. “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.”
  • While Netflix apparently wasn't mentioned by name, that's clearly the idea here. By the sound of the Times' quotes, far from taking a hands-off approach, AT&T thinks it can run HBO better than it has been. But, a "move fast and break things" attitude could be risky, especially when dealing with creative types.

Step two is generating significantly more revenue, in part through targeted advertising that benefits from all the information AT&T knows about its customers. The financial pressure was captured in this exchange between Stankey and Richard Plepler, the head of HBO:

  • Stankey: “We’ve got to make money at the end of the day, right?”
  • Plepler: "We do that."
  • Stankey: "Yes, you do. Just not enough.”

No sugar coating: Stankey made it clear that AT&T is planning lots of changes to HBO's way of doing things. “It’s going to be a tough year,” Stankey said to NYT. “It’s going to be a lot of work to alter and change direction a little bit.”

  • Considering HBO has spent decades becoming The New Yorker of TV content, it's got to be pretty galling to have the phone company come in and tell you how to run your business better on Day 1. (That's probably why the audio leaked.)

What they're saying:

  • Redef's Jason Hirschhorn: "HBO needs to scale quality. Plepler could put $2–3 billion more to work and succeed. But the HBO brand must still stand for quality. Remember, 'It's not TV, It's HBO.' Netflix went to High, Middle, Low. You know I love Netflix, but a Netflix Original does not mean the same thing."
  • Felix Salmon, responding to Hirschhorn: "In other words, HBO doesn’t scale. You could maybe double the amount of HBO that people watch, without sacrificing quality. But you can’t bring it up to anywhere near Netflix levels."

Our thought bubble: If AT&T is serious about cranking up both programming and revenue, it could decide to raise HBO's prices. That would prompt a chorus of "I told you so" from the merger's antitrust critics.

P.S.: I'm binge watching HBO's "Silicon Valley" as I write this.

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