30 December 2020

CNBC: “AT&T dismantles Time Warner to battle Netflix: The inside story”

Although Stankey was new to media, he suffered the same disease as every other media executive: Netflix envy.

He thought Plepler was aiming too low. Plepler’s plan to generate $7.5 billion in annual revenue was 12% more than HBO’s eventual 2019 revenue. But it was a far cry from the $20 billion Netflix generated.

Stankey told Plepler he wanted a direct-to-consumer solution that could get to at least 60 million subscribers in five years, according to people familiar with the matter. HBO subscriptions had fallen from about 37.5 million in 2017 to 34.5 million in 2019. Over the same time, Netflix global subscriptions jumped 50%, from 111 million to 167 million.

If Stankey could convince investors that HBO Max would mirror Netflix’s growth trajectory, he might be able to capture a higher trading multiple for AT&T. This is the holy grail for media companies this decade — convincing Wall Street that streaming growth will make up for the decline of legacy businesses like cable TV and movie theater viewing. It’s also a strategy supported by AT&T’s most notable investor, activist hedge fund Elliott Management, which last year bet $3.2 billion that divesting non-core assets and focusing on streaming could lead to a surge in AT&T shares.

Alex Sherman

As expected following Disney’s decision, another major film studio is beginning to prioritize streaming as key to their long-term strategy. Last month, Warner Bros. announced that Wonder Woman 1984 will be released simultaneously in theaters and on HBO Max, for no extra cost; later the company extended this policy to all their upcoming 2021 movie releases.

Wonder Woman 1984
Despite middling reviews, Patty Jenkins’s superhero sequel hauled in $16.7 million at North American movie theaters. Photo: Clay Enos/Warner Bros.

Now that Christmas has passed, the box office performance of Wonder Woman 1984 seems to support this decision: it made $16.7 million this opening weekend, leading by far the other Christmas releases, but that only amounts to roughly one sixth of the opening weekend of the first movie. It looks like the audience is not exactly willing to risk spending hours together with multiple strangers, so at least people have the option of watching it on HBO Max. No matter how you look at it, during a pandemic or in normal times, removing the decades-old theatrical window improves customer satisfaction, therefore is ultimately the right decision.

In the long run, I think the ultimate success of HBO will depend upon international expansion, just as Netflix has done successfully. The company already has a number of subscribers on HBO Go, and some new series have been released concurrently there – but unfortunately not Wonder Woman 1984. While on this subject, it would be nice if HBO would finally embrace the Netflix model of releasing all episodes in a season at once to let people watch at their own pace. In this streaming age, putting out an episode every week feels anachronistic.

But the transition so far is not without issues for Warner Bros. They just recently signed a distribution agreement with Roku – which apparently is big in the US, but virtually unknown everywhere else. More problematic is the criticism from several famous directors, from Christopher Nolan to Denis Villeneuve. Legendary Entertainment, the production company that co-financed Dune, even considered suing Warner Bros. because of their plan to release their movies on HBO Max, and it looks like Warner Bros is changing course at least in the case of Dune.

To me, Villeneuve’s position is pretentious and disconnected from reality, to put it nicely, especially under current circumstances – does he realize people watch movies on TVs all the time?! And that the audience is his customer, not the other way around?! The situation reminds me of when, years ago, Taylor Swift removed her albums from streaming services fearing lack of control; she returned three years later when it became obvious that the audience lived on streaming. Insisting on an exclusively theatrical release will only hurt Dune’s box office numbers and encourage piracy – I am increasingly convinced that the movie will be postponed again, then flop massively at the box office and we will never see the adaptation of the second half of the book.

While reading this article, I started considering the downsides of the streaming movement. Convenience for people comes hand in hand with lack of control: movies and series are constantly disappearing from streaming libraries and moved to other platforms as licensing agreements expire and rights change hands. It’s a common occurrence on HBO, where movies show up the fastest after theatrical release, but for limited periods of time; in some cases you will find them later on Netflix. Another issue is that some works never find a major streaming distributor and so their important message gets lost in anonymity. Clearly there is still room for improvement in this evolving world of entertainment.

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