It’s Not HBO. It’s TV. Apparently.

M.G. Siegler
500ish
Published in
6 min readJul 10, 2018

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Where to begin?

Yesterday and this morning, I saw all the hoopla surrounding the comments that an AT&T executive, John Stankey, made during an all-hands meeting with HBO employees. The point of the event, which was a sit down with HBO head Richard Plepler, was clearly meant to ease concerns about AT&T’s takeover. It clearly did the opposite. Hence, the leak of the remarks to Edmund Lee and John Koblin of The New York Times.

Obviously, I wasn’t in the room and I know it’s very easy to take these things out of context. But again, the leak itself seems to indicate those with the context did not like said context. Also, the leak was a recording. Pretty hard to take that out of context. So let’s take a stab at why.

Unlike a lot of the other commentary, I actually don’t think the high level notion that HBO needs to ramp its content production is insane. I do worry that it will change the network from what has made it great, but times have changed. HBO can coast on its laurels for a while — they’re great, award-winning laurels — but eventually, they will have to change to survive in the new world order of streaming.

But pretty much everything else that Stankey laid out (or, at least, what was leaked), sounds fairly crazy. First and foremost, how on Earth do you not even mention Netflix in your remarks?

We all know why executives don’t do this in public comments — why give free airtime and thus, advertising, to your rival? — but this was an all-hands. These should be run as honestly and bluntly as possible (see, for example, this). Unless you don’t trust your employees — and maybe you shouldn’t! — but then you have a whole other set of problems.

Kudos to Stankey for acknowledging that the changes they want to implement are going to be hard. Of course, he gets the opposite of kudos for comparing said hardship to childbirth… 🤦‍♀️

But here’s the real crux of the situation:

“We need hours a day,” Mr. 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.”

Once again, the first part of his statement is reasonable. The world has changed and continues to change. The second part of the statement is absolutely dumbfounding. Does Stankey know the business HBO is in?

Since its inception, HBO has famously been the channel that eschewed advertising. For this, viewers paid a premium. This was completely counterintuitive in the early days. These days, it seems downright prescient. This is what everyone wants to do these days. HBO has been doing it for decades. And this guy wants them to do something else?!

The shift away from advertising is happening, in a number of ways, and HBO was the forefather of this movement.¹ Someone should really remind Stankey of that. Perhaps say, Richard Plepler, sitting right next to him on stage.

To be fair, “alternate models of advertising” is nebulous. Who knows what he means. I’m not even sure Stankey does. “Big data!” But the point is that he shouldn’t be talking about advertising at all.

In fact, the only thing he should be talking less about is getting “more data and information about a customer”. This is the era of Facebook’s Cambridge Analytica shitshow. Per above, I realize this was meant to be a closed-door meeting, but if you’re looking for one key statement that would perhaps rub your (future) employees the wrong way…

Actually though, there was one other bit that was probably more responsible for said leak:

Mr. Plepler tried to pin down Mr. Stankey on the question of how much AT&T planned to invest. Without specifying any certain amount, Mr. Stankey said, “I do believe there needs to be stepped-up investment.”

Mr. Plepler interjected: “Let’s give him a hand for that simple sentence! That simple sentence deserves a hand!”

“Also,” Mr. Stankey said, “we’ve got to make money at the end of the day, right?”

“We do that,” Mr. Plepler responded, to scattered applause.

“Yes, you do,” Mr. Stankey said. “Just not enough.”

Plepler did his best to deflect this — “Oh, now, now, be careful” — but is Stankey actually trolling his audience here? WTF?

HBO isn’t just making money, they’re making a shit ton of money in a business where no one this side of Disney makes a shit ton of money. As the NYT notes, $6 billion in profit over the past three years, to be exact.

Frankly, if that’s not good enough for AT&T, AT&T is insane and everyone at HBO should demand they not be sold to such an insanely unreasonable company. Netflix is an amazing company, but even they’re not nearly making $2 billion in profit a year. To be sure, they will someday soon, but it won’t be for the reasons that Stankey is implying. It will be for very different reasons.

Reading all of this, it’s just not clear to me that AT&T understands exactly what it’s buying in HBO. Obviously, that’s not the only reason for the deal. But as noted, it is the “crown jewel”. Instead, AT&T clearly wants the diamond mine the crown jewel came from. And apparently wants the royal court to be the miners. Good luck with that.

¹ As opposed to the foremother, who was too busy giving birth, clearly.

Update: And sure enough, as expected (and noted above), there was more nuance in the talk than was originally reported. Peter Kafka at Recode also got the audio and graciously transcribed much more of it than the NYT did.

My take after having read it twice: it’s both better and worse. Stankey does seem to be at least trying to say the right things to calm the HBO employees about their future under AT&T. But he’s also clearly laying the groundwork for major new initiatives that have not historically been in HBO’s DNA.

Again, I don’t think this is necessarily a bad thing — some of it may even be a good thing — but it is going to be a different thing than what HBO has done in the past. And history is littered with the corpses of companies that tried to fundamentally alter what they are, but could not. (Of course, the flip side is that this is the only way to survive, long term. So, we’ll see!)

The main issue I have now is the insistence on calling out Facebook as their main problem going forward. I disagree. The world is moving on from this being an issue, Stankey is addressing a problem from the past — albeit the recent past. Much more pressing is Amazon, as they’re directly going after the time HBO is going after with Prime Video. (Yes, Facebook is too, to some extent with their video offering, I just don’t think that will work — see above about companies trying to be something they’re not.)

And, of course, it remains ridiculous that they do not mention Netflix in this entire talk. They’re indirectly referenced (in the comments about House of Cards, and presumably in the talk of competition that can amortize content costs over a broader base), but it should be addressed head on. Reading over his comments, that’s clearly where Stankey wants to push HBO. Even if their tactics are different, they’re going to be in direct competition for eyeballs.

Anyway, again, certain elements of this now read better, but I almost come away feeling worse than I did after reading the NYT excerpts. I knew there would be wiggle room in terms of context there. There’s less wiggle room now. AT&T aims to inject HBO with steroids. And they’re going to want to see not only longer home runs, but more home runs as a result. (And yes, to tie the metaphor together, maybe more sports content?!) We’ll see what that does to HBO…

Again, I go back to the beginning. It’s now no longer HBO. It’s TV.

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Writer turned investor turned investor who writes. General Partner at GV. I blog to think.