WarnerMedia Boss: HBO Has to Up its Game

NEWS ANALYSIS — The status-quo at HBO apparently isn’t good enough for the new boss at WarnerMedia — AT&T’s corporate shell comprising Turner, Warner Bros. and HBO following its $85 billion acquisition of Time Warner.

The award-winning premium network behind “Game of Thrones,” “Big Little Lies,” and “Westworld,” has to increase “hours of engagement,” John Stankey, who replaced Time Warner CEO Jeff Bewkes at WarnerMedia, reportedly told a company townhall meeting with HBO CEO Richard Plepler last month following the merger.

As reported by the New York Times, Stankey wants HBO programming to become habitual in a consumer market he says is driven by portable devices that capture their attention “every 15 minutes.”

“It’s going to be a tough year,” Stankey said. “It’s going to be a lot of work to alter and change direction a little bit.”

Tough words to hear for a signature network that has 40 million domestic subscribers (nearly 150 million globally) and was often lauded by Bewkes (a former boss at HBO) during his fiscal calls.

Specifically, Stankey believes increased consumer interaction with programming will generate data, which he says enables better monetization of content and is “very important to play in tomorrow’s world.”

With HBO spending about $2 billion on original content — a quarter what Netflix is spending — Stankey hinted operating budgets could be increasing.

He said HBO would have to transform from a boutique operation to generating content that has wider appeal.

“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.”

Indeed, HBO Now, the standalone $15 monthly SVOD service, reportedly has about 5 million subscribers — less than 10% of Netflix’s domestic sub base.

Stankey told employees they should be happy AT&T and not another media company such as Fox or Disney acquired Time Warner due to the lack of job overlap. At the same time, he said HBO has to make money at “the end of the day.”

“We do that,” interjected Plepler, according to the Times. “Just not enough,” responded Stankey.

A curious statement, indeed, considering HBO generated about $6 billion in operating profit in 2017.

Plepler deftly diffused the situation saying HBO did as well as it could with the hand it was dealt at Time Warner.

“And we well understand that that is not going to be sustainable going forward,” he said.

Departed Turner CEO John Martin Was a Friend of Home Entertainment

NEWS ANALYSIS – Lost in the rapid-fire of events at the closure of AT&T’s $85 billion purchase of Time Warner was the departure of John Martin, CEO of Turner.

AT&T Entertainment CEO John Stankey, who became CEO of renamed WarnerMedia, replacing retiring CEO Jeff Bewkes (at former Time Warner), made the announcement June 15 in a memo to employees.

WarnerMedia includes Warner Bros., HBO and Turner (TBS, TNT, CNN, Turner Sports, Cartoon Network, among others).

Martin, who was also former CFO of Time Warner, was appointed CEO of Turner in 2014 by Bewkes. A proponent of the merger, Martin also once called AT&T’s online TV platform DirecTV Now, “a money-losing business,” – a comment not likely ignored by his new corporate bosses.

“This initial Turner organization structure will allow me to work more closely with more Turner leaders and accelerate my personal learning of the business as we define our shared priorities across the company,” said Stankey regarding Martin and other Time Warner executives’ exits.

Regardless, Martin was a long-time advocate of home entertainment – including UltraViolet and electronic sellthrough of content.

In 2010, Martin backed the short-lived rollout of premium VOD, which would allow consumers to rent a new-release theatrical movies in the home within days of its box office debut.

In 2012, on a fiscal call, Martin showed a sense of humor when he said he was encouraged by “recent signs” of stabilization in home entertainment, with total consumer spending “actually flat” for the year.

He chastised the industry (i.e. Disney) for not rallying around UltraViolet as the primary cloud-based content ownership platform.

“Look, challenges still exist [in home video],” Martin told a separate investor event, adding that secular challenges had mandated the industry to embrace alternative distribution strategies such as street-date transactional video-on-demand and premium VOD, among others.

“Warner Bros. has been the leading studio at trying to move toward embracing new technology, advantaging channels that are higher margin and disadvantaging those channels that are lower margin,” he said.

Martin believed it was that mindset that pushed Warner to spearhead rollout of UltraViolet. He said adoption of the platform was “not where we want it to be,” but that the studio took the leadership position at the time when ongoing technological challenges mandated action.

“Somebody’s got to try and move forward because the industry has to move more quickly to embrace these higher-margin opportunities,” he said.

Warner earlier this year joined Disney and other studios (except Lionsgate and Paramount Pictures) in support of the latter’s rebranded Movies Anywhere platform.