HBO Must Get Bigger and Broader, Says Its New Overseer
Posted July 8, 2018 7:03 p.m. EDT
Change is coming to HBO, now that it is part of the AT&T corporate family. That much was clear to the 150 employees who attended a recent town hall meeting at the network’s headquarters in midtown Manhattan.
The main speaker was John Stankey, a longtime AT&T executive who now oversees HBO in his new role as chief executive of Warner Media. During a straight-shooting, hourlong talk, a recording of which was obtained by The New York Times, he laid out his rough vision for the network, and warned his audience that the months ahead would not be easy.
“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.”
AT&T executives said all the right things during the long prelude to the company’s $85.4 billion acquisition of Time Warner, which was completed in June. They acknowledged that the corporate culture of a Dallas-based telecommunications giant was different from that of the more freewheeling media and entertainment concerns in New York and California. They pledged to take a hands-off approach to the company’s crown jewel, HBO, which has won endless Emmys while generating billions in profits.
But the town hall meeting suggested that AT&T would not be a passive corporate parent.
Richard Plepler, HBO’s gregarious and urbane chief executive, hosted the talk at the cozy HBO Theater on the building’s 15th floor. Stankey’s appearance came as part of a tour that included stops at Warner Bros. and Turner, the media properties that were once part of Time Warner and now belong to AT&T’s Warner Media division.
Plepler, 58, and Stankey, 55, sat angled slightly toward each other on the modest stage. During the conversation, which began at noon June 19, Stankey never uttered the word “Netflix,” but he did suggest that HBO would have to become more like a streaming giant to thrive in the new media landscape.
Stankey described a future in which HBO would substantially increase its subscriber base and the number of hours that viewers spend watching its shows. To pull it off, the network will have to come up with more content, transforming itself from a boutique operation, with a focus on its signature Sunday night lineup, into something bigger and broader.
“We need hours a day,” 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.”
Known for “The Sopranos,” “Game of Thrones” and “Westworld,” HBO has long favored quality over quantity. Its high-gloss productions often take years to develop and can cost millions per episode. That approach has won the network more Primetime Emmy Awards than any of its competitors during the past 16 years, with Plepler the master curator.
In recent years, Plepler has emphasized HBO’s “bespoke culture” and its enduring appeal to A-list producers and stars at a time when Netflix, Amazon and Apple have bottomless budgets. On his watch, “Big Little Lies” has brought the Oscar winners Reese Witherspoon, Nicole Kidman and Meryl Streep to the network, and shows like “Barry” and “Insecure” have charmed critics. But during the town hall meeting, Stankey said HBO should consider trying something new.
“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,” Stankey said. Bringing the point home, he added that HBO must “build that brand so that it’s broad enough to make that happen.”
Plepler tried to pin down Stankey on the question of how much AT&T planned to invest. Without specifying any certain amount, Stankey said, “I do believe there needs to be stepped-up investment.”
Plepler interjected: “Let’s give him a hand for that simple sentence! That simple sentence deserves a hand!”
“Also,” Stankey said, “we’ve got to make money at the end of the day, right?”
“We do that,” Plepler responded, to scattered applause.
“Yes, you do,” Stankey said. “Just not enough.”
“Oh, now, now, be careful,” Plepler said.
HBO has, in fact, been a consistent moneymaker. During the past three years, while allocating more than $2 billion a year to its programming, the network has made nearly $6 billion in profit. But if it is to compete with upstart rivals like Netflix, which plans to lay out some $8 billion this year, its level of spending must increase considerably.
“We well understand that we played the best hand we could with the hand we had,” Plepler said. “And we well understand that that is not going to be sustainable going forward.”
Stankey also said that the network’s number of subscribers — 40 million in the United States, out of 142 million worldwide — was not going to cut it. HBO will have to find a way “to move beyond 35 to 40 percent penetration to have this become a much more common product,” he said, referring to its current market size.
At the same time, he acknowledged that HBO has commanded deep loyalty: “You’ve earned the dynamic amongst your customer base that when you put a new piece of content out there, people will try it, just because they trust you’re going to be putting something in front of them that they might like. We now need to figure out how to expand the aperture of it without losing the quality.”
Representatives for the network and Warner Media declined to comment for this article. To make a bigger, broader HBO, while also guarding its distinctive identity, the two executives will have to find a way to work together despite their differences.
Plepler, who joined HBO in 1992, is a showman, garrulous and inquisitive. He and his wife, Lisa, have entertained heads of state, authors and movie stars at their Upper East Side town house. Born and raised in Connecticut, and very much at ease among the power players of New York, Washington and Hollywood, Plepler has deep ties to the Democratic Party.
The California-born Stankey, who lives in Texas and has donated to a number of Republican campaigns, cuts a lower profile. He started his telecommunications career at Pacific Bell in 1985 and has served in various roles at AT&T, including chief technology officer and head of the company’s DirecTV unit. On the stage of the HBO Theater, he described himself as a “Bell-head,” a term that was probably lost on the people in the seats.
During the talk, Plepler seemed willing to make changes. “I’ve said, ‘More is not better, only better is better,’ because that was the hand we had,” he said, as Stankey looked on. “I’ve switched that, now that you’re here, to: ‘More isn’t better, only better is better — but we need a lot more to be even better.'”
Stankey’s experience at AT&T — which offers two streaming services, DirectTV Now and WatchTV — has given him a deep familiarity with the recent shift in how media is distributed. He warned that there would be only so many streaming companies in the future. If HBO would like to end up as a heavyweight in the industry, he said, it would be wise to add “other types of content” to what is available on its stand-alone streaming service, HBO Now.
He also made the case that HBO’s employees should consider themselves fortunate to have AT&T as their new corporate parent, rather than a company in the same business.
“The good news for many of you in this organization is that it’s not Fox or Disney sitting up on this stage now,” Stankey said. “There’s virtually no duplication with AT&T in what we do.”
In other words, your jobs are safe.
But he cautioned that HBO’s employees would notice a change in tempo and metabolism in the days ahead. “I suspect if we’re in a situation where we’re going to be investing heavier, that means that there’s going to be more work for all of you to do — and you’re going to be working a little bit harder,” Stankey said.
After comparing the next 12 months to a “dog year,” he invoked another metaphor.
“You will work very hard, and this next year will — my wife hates it when I say this — feel like childbirth,” he said. “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. She says, ‘What do you know about this?’ I just observe, ‘Honey. We love our kids.'”
Stankey also said he was starting to get used to the media glare that has gone along with his new, high-profile job. When he mentioned that newspapers have lately shown an interest in his personal life, Plepler cut him off.
“You’re now in the entertainment business, John,” he said. “There are no secrets.”