Premium channel HBO, one of the crown jewels in AT&T’s $85 billion acquisition of Time Warner, is in line for some changes now that WarnerMedia CEO John Stankey is calling the shots.
In June, AT&T held a town hall meeting with HBO employees where Stankey laid out his thoughts on how HBO would need to evolve to remain competitive. According to the New York Times, which scored a recording of the meeting, Stankey wants HBO to produce more and broader content to drive more hours of engagement, which in turn will produce more customer data that can be monetized through advertising or subscriptions.
Earlier this year, HBO’s streaming service, HBO Now, reportedly surpassed 5 million subscribers. According to Bloomberg, that total represented about 10% of HBO’s total U.S. subscriber base. Internationally, HBO has 142 million subscribers.
In addition to amassing a fairly large subscriber base, HBO has been a consistent moneymaker for Time Warner. During the most recent quarter, HBO’s revenues increased 3% to $1.6 billion as a 10% jump in subscription revenue helped offset a 29% decline in content and other revenues due to lower international licensing revenues. Operating income for HBO fell 12% to $516 million as programming costs spiked due to higher spending on acquired and original programming.
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Before the merger became official, Stankey promised to avoid any culture clashes that could arise from a massive telecom taking over a media company.
“People who are running the creative process are professionals at running the creative process. I don’t believe that AT&T—the historical AT&T—by its nature brings much capability or intellectual property to do that better,” Stankey told the New York Times last month.
But now it seems that WarnerMedia and Stankey will be getting more hands-on with HBO and changing the way the company is run. Up to this point, HBO’s original programming strategy has focused on producing strong lineups of original series on Sunday nights. The channel has had enormous success with current series including “Game of Thrones” and has a long legacy of producing popular and critically acclaimed dramas like “The Sopranos” and “Six Feet Under.”
But as competitors like Netflix have continually ballooned their content budgets—this year Netflix expects to spend $8 billion on content—HBO has shelled out a relatively smaller $2 billion on a smaller slate of shows.