Warner Media subsidiary HBO will be facing tough changes under the new leadership of AT&T (T). John Stankey, head of Warner Media, spoke to HBO employees at a recent meeting in which he emphasized on the need for increasing engagement. Stankey said the days of HBO focusing on a special group of viewers were over and that the network would have to work on increasing its content as well as the size of its audience in order to compete with streaming giants like Netflix (NFLX).
Stankey said AT&T would invest more in nurturing HBO content. The AT&T executive warned that this is going to be a tough year and HBO had a lot of work ahead as it changed direction. He reassured employees that while their workloads would increase, their jobs are relatively safe under AT&T.
HBO has churned out some of the most popular shows on television, such as Game of Thrones and Veep, and has won several awards for its content, but the number of regular shows is less and AT&T wants to change this.
AT&T wants to focus on improving engagement as it believes this will open up additional revenue streams through advertising and subscriptions. In other words, the company wants to increase the number of hours people spend watching HBO shows as well as the number of its subscribers. All this must be done without compromising on quality.
Although HBO has made generated revenue consistently and its profits have exceeded its investments, AT&T feels more investment is needed to keep up with Netflix that is looking to spend around $8 billion on content in 2018. HBO hit a milestone of 40 million subscribers in the US and 142 million worldwide in 2017 while Netflix reached 57 million US subscribers and 125 million global customers during the first quarter of 2018.
Stankey wants HBO to surpass its market size beyond the 35-40% range and wants it to increase the number of US subscribers, in particular. The Warner Media chief believes HBO already has quality and enjoys the trust of viewers and must use this advantage to broaden its offerings while maintaining the same quality.
AT&T, which has its own streaming services, is aware of the changes in the media landscape and the management believes it is necessary for HBO to invest in its streaming service as well as diversify its content. Going forward, these steps would help HBO to gain a strong position in the industry especially at a time when rivals like Netflix and Amazon (AMZN) do not seem to keep limits on their investment budgets.
Stankey’s remarks hint at the fact that AT&T does not intend to be a ‘cool parent’ and wants to make serious changes at HBO. However, those in the TV industry remain skeptical in terms of the impacts of these changes on HBO’s content quality which allows it to stand out from the rest of the crowd at the end of the day.