HBO Became HBO Before HBO Could Become Netflix
Joe Flint
There was a time when HBO was the most admired and coveted brand in television. Yes, it was the era before streaming, but it wasn't all that long ago. And then in walked AT&T with every bad idea in the book. So bad that they quickly offloaded the entire Warner Bros parent entity to David Zaslav to merge with his Discovery network. Cut to last year:
A group of Warner Bros. Discovery executives gathered in a conference room at the Beverly Hills Hotel last spring to discuss a hard truth: Their Max streaming service was kind of a letdown.
It wasn’t considered a must-have or utility service, like Netflix and Amazon Prime, but more of an add-on item, a strategy officer told the team, including Chief Executive David Zaslav and Casey Bloys, who runs content for HBO and Max.
Over snacks, coffee and Diet Cokes, they plotted Max’s revival.
“We said, ‘OK, we’ve got to sort of refocus our bull’s-eye,’” said JB Perrette, CEO and president of global streaming.
This piece does read a bit puffy – thank god we got the "snacks" and "Diet Cokes" detail in there – but it still directionally points to the problem WBD recognized and aimed to fix with Max. A problem of their own making:
When Zaslav unveiled plans for the Max streaming service two years ago, he declared, “this is our rendezvous with destiny.”
That destiny, as he laid it out at the time, was to be “the place every member of the household can go to.” It offered critically acclaimed fare from HBO, popular reality shows from Discovery’s cable networks and lots of children’s programming.
But most consumers already had a streaming service for every member of the household. It was called Netflix.
At the time, Max's approach seemed fairly reasonable – in particular with all of the Discovery comfort content that no one else had. The problem, as it turns out, is that such content doesn't seem to drive subscribers. It may be good as filler content to keep them around, but Max wasn't growing as WBD would have liked. And part of that was perhaps that content, which just completely muddled the message of what Max was supposed to be. Again, they thought they could be the sort of "everything" streamer. But yes, Netflix already staked that claim. And WBD was never going to be able to out-Netflix, Netflix.
So they pivoted, as least from a content-focus perspective:
Max’s second life is more streamlined, with adult-oriented content like “The Pitt” and “Hacks,” and true-crime offerings such as the documentary “Quiet on Set: The Dark Side of Kids TV.” And HBO’s highly anticipated “Harry Potter” series is scheduled to debut in 2026.
“We’re not fighting for the more-is-better game,” Perrette said. “We’ll let others deal with the volume.”
Well, they were fighting that game – as was everyone in those earlier days of streaming. But again, no one could beat Netflix there. It was stupid, not to mention insanely expensive, to try. In hindsight (though not hindsight for all of us), only Sony made the right decision in continuing to partner with Netflix rather than build yet another streaming service and burning billions of dollars in the process.
But everyone has now pulled back on that spend and volume – including, in ways, Netflix itself. Wall Street basically dictated that everyone else change their strategy, and Netflix, having won the arms race, could afford, quite literally, to pull back a bit as well.
Everyone knows the old famous quote from Ted Sarandos "The goal is to become HBO faster than HBO can become us" – one which he now says he regrets, because it was too shortsighted. Netflix is now far larger than HBO ever was. Not to mention more powerful – a $400B company perhaps on their way to $1T. But what's really wild about the quote, which he said in 2012, just as they were embarking on their original content efforts, is that it failed on both sides! While Netflix failed to become HBO in a good way, HBO failed to become Netflix in a bad way.
And so now, in a way, the goal is for HBO to become HBO again faster than anyone else can become HBO. Technically, for Max to become HBO, I suppose. (Yes, my headline quip was better: "So what you’re saying is: HBO became HBO before HBO could become Netflix.") And it seems to be working,1 with the end of Game of Thrones transferred over to House of the Dragon (though there are some of the same worrying issues already cropping up there...) and the end of Succession transferring over to The White Lotus (and perhaps Industry). And yes, The Last of Us, the current zeitgeist-y show thanks to a certain element this past week which I won't spoil but I'm still recovering from.2
I long ago predicted that I thought Apple TV+ would actually become the new HBO. And I think it has in many ways, partially thanks to Apple's relatively meager content output, which has ended up being a strength in terms of quality (aside from their movies, which is another matter) but a weakness when it comes to growth (and churn prevention) for the actual streaming service.
Speaking of, WBD has also re-learned another important lesson: the power of bundling:
One key part of Max’s makeover was a bundling partnership it launched with Disney last summer in which subscribers can purchase Max, Disney+ and Hulu at a significant discount to their respective stand-alone prices.
It has been a major subscriber driver, with high retention rates, and Warner executives have said they are eager to extend the partnership overseas.
With more of a focus on quality over quantity, these bundles make even more sense. It will let both Max and Apple TV+ try to be HBO, perhaps they should bundle. Perhaps Apple should bundle them. Perhaps that's still in the cards...3
M.G. Siegler
M.G. Siegler
M.G. Siegler
1 Though the pull-back on children's content is disappointing -- in particular Semsame Street, which is leaving them in a tough spot, it seems.
2 Something not shocking to those familiar with the game, of course. But the timing still was likely a surprise to everyone.
3 Speaking of timing, this story is also interesting given the fact that WBD just had two hits back-to-back at the box office in the forms of The Minecraft Movie and now Sinners, after quite a few flops, to the point where studio chiefs Pamela Abdy and Michael De Luca were widely reported to be in trouble. Just a few weeks later, and they seem safe. And WBD is doing this victory lap, of sorts. Perhaps to drum up some M&A interest?...