Only weeks after finalising its US$86 billion acquisition of WarnerMedia (formerly Time Warner), AT&T has told HBO it needs to make some big changes to lift its bottom line.
HBO, a subsidiary of WarnerMedia, has traditionally produced a relatively small amount of high-quality programming.
But with one of the world’s biggest telecommunications companies now at the helm, HBO is being told it needs to shift its business model to a more smartphone-friendly approach to keep pace with the changing media landscape.
Speaking at a meeting with employees held at HBO’s headquarters in New York, AT&T executive John Stankey described this new direction.
“We need hours a day,” he said in a recording leaked to the New York Times. “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.”
With streaming services such as Netflix now dominating the market, viewership of online video is now beginning to outpace television.
Market research firm eMarketer revealed that spending on TV ads fell for the first time ever in 2017, as viewers moved away from their boxsets in favour of streaming services.
This is while Netflix recently eclipsed 125 million global subscribers.
Stankey’s comments follow earlier calls from AT&T to create shorter content more suitable for mobile phones.
Speaking last year, AT&T CEO Randall Stephenson took aim at one of HBO’s flagship program.
“Think about things like Game of Thrones,” he said about the show which now averages 30 million viewers per episode.
“In a mobile environment, a 60-minute episode might not be the best experience. Maybe you want a 20-minute episode. Instead of showing full-length episodes on all devices, it might be best to curate the content uniquely for a mobile environment.”
HBO is unsustainable
Also speaking at the recent meeting in New York, HBO CEO Richard Pleper indicated there would be wholesale changes in terms of programming.
“I've said, ‘More is not better, only better is better,’ because that was the hand we had,” Plepler said.
“I've switched that, now that you're here, to: ‘More isn't better, only better is better—but we need a lot more to be even better.’
“We now need to figure out how to expand the aperture of it without losing the quality.”
He also pointed out that HBO’s current model is “not going to be sustainable going forward.”
Not so fast
AT&T's overhaul could be stopped in its tracks, if the Department of Justice (DOJ) has its way.
On Thursday, DOJ lawyer Craig Conrath lodged a formal notice of appeal against the federal judge's decision to allow the acquisition last month.
The notice has been handed to the U.S Court of Appeals.
The DOJ has previously opposed the decision, based on a view that the merger reduces competition and increases costs for consumers.