Well-known industry analyst Alan Wolk is publishing his popular Week In Review columns first on FierceVideo every Friday. This means that FierceVideo readers are the first to get all Wolk's insights as they navigate the fast-moving television business.
1. Shake-ups at HBO Max
Former Hulu chief Jason Kilar, who was recently called back into service to take over HBO Max made his mark by getting rid of industry veterans Bob Greenblatt and Kevin Reilly. As such, Kilar has been making the rounds of news shows with a relentlessly upbeat message about how he’s happy with their numbers vis a vis Disney and Peacock and how Amazon is going to need to strike a deal with Max for Q4.
Why it matters
It is, after all, the job of CEOs to sound relentlessly upbeat about their companies, and I feel for Kilar, he was truly tasked with putting lipstick on the proverbial pig.
There’s just so much “No” sticking to HBO Max right now.
Let’s start with what I’ll call the Original Sin or the very idea behind the app.
There are around 40 million people who subscribe to HBO right now, either via MVPDs or via HBO Now, and many of them will come along for the ride, at least at first, because they’ll just be getting what they’ve already paying for and more, all for the same price.
Sort of hard to turn down.
But here’s the problem: in order to succeed, Max has to convince non-HBO subscribers that Max is different enough from HBO for them to give it a second look. That some combination of “Friends” reruns and new series is different enough from old school HBO that they suddenly want to subscribe...at a price point that is much higher than any of the seven other Flixes.
And doesn’t even come with free two-day shipping.
Then there’s the second part of the Original Sin: they’ve got to convince the 40 million current subscribers that the new Max is similar enough to the HBO they knew and loved so that they continue to subscribe to Max.
Which is not nearly as easy as it sounds given that many of their competitors are making HBO-like content and will likely be hiring all the people AT&T drove away when they first took over to recreate that HBO magic elsewhere.
So, there’s that.
Then there’s the fact that the launch of Max was so confusing that even mainstream sites were publishing charts explaining all the various flavors of HBO and where you could and could not watch them. (Kilar has admitted this was double plus ungood.)
Then there’s the fact that Max still doesn’t have deals with Amazon and Roku, where somewhere between two-thirds and three-quarters of all streaming happens and, Kilar’s assertions notwithstanding, HBO doesn’t really have anything close to the upper hand in those negotiations because no one is demanding Max just to watch “Friends” reruns and the handful of new series they have.
Worse still, looking at comments on social media and in the comments section of various news sites, it seems the vast majority are blaming it all on HBO.
This was a severe miscalculation. People don’t like “cable companies” and so in a traditional carriage fee battle, consumers will side with the network. But here, viewers like Amazon and Roku and like being able to subscribe via their Channel Stores and like having a single place to manage all their subscriptions and are 100% not happy that HBO “won’t put the app on Roku”, which, as per the comments, is how many/most consumers are framing the beef.
So, there’s that too.
Then there’s the fact that NBCU, which also recently launched an app that is not being carried by Roku and Amazon, played a hand no one was expecting and got a whole lot of kudos from consumers and from the industry for it.
Looking at the market and realizing that without the Olympics or much in the way of new programming, it was unlikely anyone would want to pay cash money to subscribe to Peacock, NBCU rolled it out as a free app (a FAST), which got a whole lot of people to sign up, which thus got NBCU a whole lot of email addresses they can use for future marketing efforts, both for paid Peacock and on behalf of their advertisers, as they can turn those email addresses into target segments.
It did not take long for industry observers and consumers to compare the Peacock’s free strategy and HBO’s $15/month one and declare Peacock the winner.
So, there’s that too.
What you need to do about it
If you’re Kilar and his new hires, you’ve got a laundry list, but I’ll just list out the top two:
1. Establish the value of Max to existing HBO subs, so they’ll continue to see the value of paying you $15/month versus less-than-that to Netflix, Hulu, Amazon, Apple TV+ or Showtime, given that they all feature shows that would easily be at home on HBO. (Part of that task is going to be convincing the creative community that they will still find a collaborative and supportive partner in HBO, even with AT&T in charge.)
2. Establish the value of Max to new subs, people who didn’t find HBO compelling enough to subscribe to these past 30 years. This may mean you need to wait till the post-pandemic period, as you are going to need more than Friends reruns, and it also means accelerating the roll out of the ad-supported version so that the $15 price tag isn’t an issue.
If you’re everyone else, don’t forget that HBO is still very popular, has strong name recognition and the massive resources of AT&T behind them. In other words, don’t count them out.
If you’re Amazon and Roku, stand your ground. You’ve got the upper hand for now, but it might be worth spending some marketing dollars to make sure people continue to see you as the White Hats.
2. Locast expands again
Locast, the non-profit version of Aereo, announced that it was expanding to Minneapolis, and the broadcast networks said...nothing.
Why it matters
This seems to be less about anyone actually believing that Locast is somehow legal because rather than charge viewers, they simply ask them for donations, and more about the broadcast networks no longer caring about broadcast all that much as they get that their future is all about OTT and their Flixes.
They get that things are changing, that at some point in the near(ish) future, they are going to run their linear feeds on their Flixes and while they will likely continue to run and support broadcast stations, those stations, whether watched over the air or via Locast, will be a great way to promote their Flixes to people without traditional pay TV subscriptions.
It’s also an acknowledgement that the audience for Locast is limited (as of July they claimed around 1.4 million users but that seems to be “number of people who signed up” versus “number of people who use the app regularly”) and that Locast is not going to really affect them and their retrans fees, a part of the business that is feeling decidedly old fashioned.
To be clear, Locast and ABC, CBS, FOX and NBC have all sued and countersued each other, and AT&T and Dish are both carrying Locast as an app and supporting them in court. (Pointing viewers to Locast is their MO in carriage fee disputes.) But there’s not anywhere near the level of anguish and fear that surrounded Aereo as the networks are all firmly focused on their Flixes.
My best guess is that Locast, which also runs all of the diginets, the sub-stations that have popped up on digital over the air transmissions, will become a FAST for those diginets whose ability to target various underserved audiences makes them a natural for OTT.
What you need to do about it
If you’re one of the big four networks, you might want to ease up on the lawsuit. Fiduciary responsibility to your shareholders likely requires you to make something of an effort to stop them, but realistically in a few years, the value you get from being able to promote your Flix to all those cord cutters via Locast will likely outweigh whatever money you lose in retrans because of them.
Given the number of and popularity of the FASTs, and how much linear content (news) they are now running, Locust just isn’t going to be that compelling an option for cord cutters, especially given that they’ll constantly get hit up for donations, something the FASTs don’t do.
If you’re a viewer and you’ve cut the cord but really want a way to watch your local broadcast stations and an antenna isn’t an option, consider Locast to be Plan B.