Will AT&T be able to handle HBO, game of thrones, the sopranos

Business


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 Thrones” is 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-fueled 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?

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“HBO’s and AT&T’s cultures also come from a very different financial perspective,” said Gary Arlen, the 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 chairman 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,” Mr. Arlen said.

HBO is facing a change in ownership as it finds itself competing for viewers and talent like never before.

In 2013, when Mr. 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 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 what HBO lays out each year.

Once the deal is completed, Mr. Plepler will report to John Stankey. In his more than 30 years at AT&T, Mr. 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, Mr. Stankey will go on a corporate good-will 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 Mr. 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,” Mr. Plepler told The New York Times shortly after the deal was announced in 2016. He added that he would be “very surprised” if AT&T did not embrace that.

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,” Mr. Stephenson said at a recent tech conference in California. “It’s been run very independently. HBO is run independently from Warner Bros., which is run independently from Turner, and 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. And Mr. Stephenson has stressed the need to amplify HBO’s streaming service.

“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 Mr. Plepler’s way. But at another conference, Mr. Stephenson let slip one comment that hinted at a more aggressive 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 60-minute episode may not be the best experience? Should you think about 20-minute episodes?”

Although HBO still generates big revenue ($6.3 billion last year), its status as the ultimate prestige network is under some threat. While it has led all TV networks in Emmy nominations for 17 consecutive years, that gap is narrowing. Netflix, which makes shows like “Stranger Things” and “The Crown,” had 20 fewer nominations than HBO last year; three years ago that gap was more than 90.

And in an effort to be all things to all viewers, Netflix turns out programming in dramas, comedies, stand-up specials, documentary series and unscripted reality shows. To counter that approach, HBO executives have begun describing their network as the home of curated content, something like a high-end content boutique.

But that strategy comes with some risk.

With far fewer releases each year than Netflix, each of HBO’s shows is under more pressure to succeed. “Here and Now,” a drama from Alan Ball that premiered this year, has already been canceled. “Succession,” the network’s new drama about a warring media family, has had so-so ratings and mixed reviews, but HBO has already renewed it for a second season.

“Game of Thrones,” the most popular series in the network’s history, has six episodes left before it bows out. The network has ordered a pilot for a potential spinoff series, with at least three others in development. “Westworld” has had steady ratings in its second season, drawing more than two million viewers an episode, according to Nielsen’s delayed-viewing data. That’s bigger than anything else on premium cable right now.

The network’s next big bet is on a limited series starring Amy Adams and directed by the “Big Little Lies” director Jean-Marc Vallée, “Sharp Objects,” which premieres in July. If HBO executives knew that “Here and Now” was a miss — as its sedate marketing campaign suggested — they are telegraphing the opposite for “Sharp Objects.”

“It ranks up there with some of the finest things we’ve ever done,” Mr. Plepler told Variety on Tuesday.

Mr. Plepler has made clear that talent — whether Mr. Vallée or Ms. Adams or Nicole Kidman — and his connection to it is what makes HBO work.

“It’s very much part of the DNA of HBO: Talent is sacred,” Mr. Plepler said after the AT&T deal was announced. “They bring the magic into our company. Writers, producers, actors. It’s their gifts that make HBO HBO. It’s pretty clear to anybody who looks at our company from afar — and, in AT&T’s case, more closely — we are a talent-centric place.”

In what could be construed as a plea to his possible future boss, he added: “I can’t imagine, with everything that Randall made clear to us, why would you ever change a winning game? I don’t think they have any intention of doing so.”



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