HBO braces for change, challengers amid AT&T acquisition
Cable network faces new ownership as it competes for viewers like never before
Media analysts and tech-industry prognosticators look at AT&T’s acquisition of Time Warner and wonder about the future of an industry in flux. Hollywood looks at the deal and wonders what’s going to happen to HBO.
The cable network that gave the world The Sopranos and Game of Thronesis the glittering jewel of Time Warner. And now that a federal judge has emphatically rejected the Justice Department’s attempt to block the merger, it is much closer to being the property of a conservatively run company based in Dallas.
HBO’s would-be minders are experts in distribution systems and profit margins who know little or nothing about the ego-fuelled dramas that help put the show in show business. Will these telecommunications executives be able to put up with the producers, directors and stars whose work gave the network 29 Emmys last year?
“HBO’s and AT&T’s cultures also come from a very different financial perspective,” said Gary Arlen, head of Arlen Communications, a research firm that examines the media and telecommunications industries. “AT&T comes from a legacy of rate regulations, and every expense has to be justified.”
And on the personal level, how will the relationship go between Richard Plepler, the smooth-talking, perpetually tanned chief executive of HBO, and the man who would be his new boss, Randall Stephenson, a former national chair of the Boy Scouts of America? The two executives seem as different from each other as the companies they run.
“AT&T is very much oriented toward technology, but it still comes from the mentality of pole climbers and operations guy,” Arlen said.
HBO is facing a change in ownership as it finds itself competing for viewers and talent like never before.
In 2013, when Plepler became chief executive of the premium cable network, it was almost alone in its field. Game of Thrones was proving to be an unlikely hit with audiences and critics, and Netflix, a company best known, at the time, for sending DVDs in red envelopes to subscribers nationwide, was not yet a threat. Its first real hit, House of Cards, was just about to start its first season.
In the 20 months since the AT&T deal was announced, the competition has grown more intense. Netflix now spends $8 billion (U.S.) on content annually, with Amazon kicking in more than $4 billion for its own programming efforts. Another streaming company, Hulu, has an annual budget of roughly $2.5 billion, a figure that is close to what HBO lays out each year.
Once the deal is completed, Plepler will report to John Stankey. In his more than 30 years at AT&T, Stankey has held a long list of positions: chief executive of the AT&T entertainment group, group president of telecom operations, chief executive of business solutions.
In the coming weeks, Stankey will go on a corporate goodwill tour — he is expected to a host a forum for HBO employees in New York next week, and he will do the same for the channels in Time Warner’s Turner family, including TBS and TNT.
Whatever he says probably won’t change Plepler’s view that HBO needs to be left alone in order to thrive.
“You have to have a Chinese wall between the creative process and everything else,” Plepler told the New York Times shortly after the deal was announced in 2016.
Since then, AT&T has said the right things — for the most part.
“At the end of the day, you’re acquiring a business that’s been very successful,” Stephenson said at a recent tech conference in California. “… it’s been a very good model.”
AT&T executives have considered how the company might take advantage of HBO’s creative engine to generate new forms of video for mobile devices.
“I’m anxious to kind of move the direct-to-consumer platforms as aggressively as possible,” he said at the tech conference.
Those statements suggest that AT&T wouldn’t get in Plepler’s way.
But at another conference, Stephenson let slip a more ag- gressive brand of corporate oversight.
“It will cause Plepler at HBO to panic when I say this,” he said, “but can you begin to think about things like Game of Thrones, as an example, where, in a mobile environment, a 60minute episode may not be the best experience? Should you think about 20-minute episodes?”