Whoever writes the book on the (hashtag) streaming wars may call this week the seven days that truly started the fighting. Sort of like how Germany and Japan were doing bellicose things like building navies and mobilizing armies before World War II truly kick off in earnest. Disney started the week with a marketing blitz (a strategic bombing campaign?), Apple TV+ ended it by launching their service (a maritime invasion?), but in the middle came AT&T with their plan for the streaming wars (a mission brief?).
Which by popular acclaim will take the spot as…
The Most Important Story of the Week – AT&T Unveils HBO Max
Before this week, we could only speculate on what HBO Max could or would be. Now we have a plan with the tactics to back it up so we can start to judge. My goal is to try to probe for insights we may have missed, but mostly, to talk about the strategy. Because finally we can.
A caveat. A giant one: this article will not contain all the thoughts needed to evaluate AT&T’s strategy. Consider this the appetizer for future strategy entrees in longer articles.
Strategic Thought 1: Offering AT&T Live TV with HBO Max is the Biggest Strength
Yep, content and product and marketing and even gratis distribution to current HBO subscribers are all important strategic factors here. But in my mind all of those are superseded by this chart introduced by John Stankey:
Frankly, most customers will want live TV of some sort in their lives. From sports to news to local channels, it’s just something folks want, and why, as Alan Wolk has banged the drum on, cord shaving or shifting is more common than cord cutting. By putting AT&T TV into their presentation, clearly AT&T sees a similar upside that I wrote about for Disney/Hulu here. It’s more profitable to be a distributor then just a streamer/channel.
Which isn’t without risks. The first risk? Playstation shutting down Vue shows the money burning proposal that MVPDs currently are. The second risk? Even AT&T is losing cable and faux-cable subscribers, as it announced on Tuesday. The third risk? See customer confusion down below. The fourth risk? Jamming in advertising, which will only muddy their offerings further.
It also dangles the biggest question mark which is does AT&T TV stay “vMVPD” or become “OTT distributor” too? Amazon, Roku and Apple are the latter with their dueling channels businesses, but Hulu Live TV, Youtube TV and AT&T TV are the former. The upside for AT&T is that once you have a streaming platform and a billing business, adding OTT add-ons from a technical perspective is relatively minor. But it could be lucrative.
Strategic Thought 2: Jargon May have Replaced Strategy
If thought 1 is the best case, this thought is the worst case. Let’s pair a key quote with the slide for it:
“We’ve created a vertically integrated company that will allow us to benefit from a virtuous cycle of development and growth. When you take our beloved, high-quality premium content and add innovative features to provide a superior user experience, it promotes subscriber engagement.”
That is a lot of buzz words packed into one sentence, and they laid it over a virtuous cycle/flywheel!
If you unpack Stankey’s words he’s saying: offering good content and a good product will increase our subscribers. Groundbreaking stuff here. But does he say how they will take an edge to get there? Crickets.
Instead, as the presentation eventually made clear, AT&T’s real strategy is about taking the past and just applying it to the future. AT&T is pretty much making the bet that “we have cash flow from cellular subscriptions to fund a streamer at a loss” and “Warner Bros/HBO have huge libraries” to be its content backbone. That’s their actual plan, not the virtuous flywheel above.
Having a jargon filled presentation doesn’t mean you strategy is bad, but I’d say it is highly correlated.
(And with this section, cross AT&T off the places I’ll ever get a job at.)
Strategic Thought 3. Targeting…Everyone?
To continue the negativity, if you had a clear strategy, you’d target a specific group of customers. Who is AT&T going to target? People. All of them. Which was probably the most-shared slide on Twitter. Specifically, how HBO Max targets all four quadrants:
I’m not ready to condemn this though. Netflix, Amazon, Hulu, Apple TV+ and AT&T all see an upside in targeting “everyone”. (Netflix takes it a step further and is trying to target everyone in every country simultaneously.) Indeed, broadcast TV started by being “broad”, didn’t it? That’s the same plan for the streaming wars, we’re just replacing ABC, CBS, NBC, PBS and Fox with Netflix, Prime Video, Hulu, HBO Max, Peacock and CBS All-Access. Everything else will be targeted, like our current cable channels.
In other words, we could rename the streaming wars, “The battle to be the new broadcasters.”
Disney+ benefits from this approach by their competitors, though. They alone among the streamers have said, “Our family channel is our family channel” and can then focus on Hulu not paying extra for kids content. Netflix, Amazon and HBO Max clearly can’t support a kids-only channel so they’ll be competing for families against that juggernaut as an add on to their broad option. (My quick take on the SWfK, streaming wars for kids, here.)
Strategic Thought 4. Let’s Talk the Biggest Upside: Content
If content is king, then HBO Max’s biggest strength is content. Let’s start with a fun, big question: is this library better than Disney+? In total size, I think we can say it definitely is, though pound for pound Disney+ still has the edge. But if this thesis is true–I’d say it’s fairly accurate–then I think both potential libraries are leaps and bounds ahead of Netflix and Amazon at this time.
Here are HBO Max’s biggest strengths:
– The “syndicated” TV corner. The Simpsons doesn’t stack up against Friends, The Big Bang Theory and South Park. Which gives HBO Max the edge over Disney+ in library TV. The rest of the big library series are divided between Netflix (Seinfeld) and Peacock (The Office), meaning HBO Max has the most consolidated library of broad comedies.
– HBO’s content dominates “prestige” TV. And it has the edge in “prestige” TV too because of HBO. The Sopranos, The Wire and Band of Brothers is a murders row of prestige TV. (And fine, Deadwood for Alan Sepinwall.) Netflix has Breaking Bad, for now and Amazon has Downton Abbey. The challenge is those licensing deals can end at any time. That doesn’t apply to HBO.
– The Warner Bros library films are good. Lord of The Rings will hold up; same with a lot of the DC films. Plus, of the classic movies that really matter, they will have arguably three of the top 5 (Casablanca, Wizard of Oz, and Citizen Kane). Still, Disney+ has the edge just based on the last ten years of films they’ve made. If The Harry Potter series—currently in a USA/Syfy licensing deal in the US—were available, we’d have a conversation, but right now I can’t get there.
– The HBO current films library is still very good. As they pointed out, HBO routinely grabs top 50 films from Universal, Warner Bros and other along with Best Picture nominees. These are pricey, but owning WB takes some of the sting off that.
(Bonus topic? I like the Rick & Morty move, though apparently it’s non-exclusive. The best a show can do is grow over time in the ratings which R&M is doing. Consider this, R&M is a show that won it’s night for cable ratings in 2017…in the 11:30pm time slot. I’m not saying Rick & Morty will become the most popular show on TV, but if season 4 grows from season 3 in quality, it could be surprisingly strong.)
Notably, I ignored most of the future content, because I don’t have a crystal ball. Instead, if I had to bet, I’d bet that nothing much changes from historical averages meaning if you make 10 shows, you hope one is a hit and one out of a hundred is a monster. Historically, HBO has batted above that average, but…
Strategic Thought 5: The Team, Is It Good?
Not to be flippant, but my take on the team of Bob Greenblatt, Kevin O’Reilly, Casey Bloys and Ann Sarnoff is that we have a team of very average executives. These are development executives who do what they’re supposed to: make shows and movies. Sometimes these shows are very, very good. (Game of Thrones is the high watermark.) But for the most part they primarily make a lot of very average shows. (Take TNT/TBS: what’s the elite show produced there?)
If I’m wrong, this is the biggest wildcard to HBO Max’s fortunes. Casey Bloys could be that person. He has Game of Thrones, Succession, Chernobyl and some good comedies to his team’s name. The counter is a lot of shows like Divorce or Camping or The Deuce or High Maintenance (I could go on) that are good or bad, but not great. Meanwhile, that one super hit (Game of Thrones) has about a dozen people claiming success for it, so hard to attribute to him.
By the way, this doesn’t put HBO Max too far behind Netflix and Amazon. Netflix has one elite show (Stranger Things) and plenty of okay shows. Amazon doesn’t have a super hit either, but a couple good shows. For films, Amazon does not have a hit, and this says a lot about Jen Salke’s status. The only studio with an edge here is Disney with Kevin Feige (and maybe Pixar’s internal culture). And for reality is Mark Burnett. And whoever has NFL/College Football rights.
(And with this section, cross Warner Bros/HBO Max off the places I’ll ever get a job at.)
Strategic Thought 6: Customer Confusion is AT&T’s Biggest Hurdle
Writing this, I googled AT&T TV Live to find which service they are talking about. Then I somehow found both the AT&T Now and AT&T TV pages, which aren’t the same thing. And the former has a better website then the latter, even though it will be deprecated. Meanwhile, no one is quite sure who will get HBO Max for free, and trying to explain it to customers will be a nightmare.
Meanwhile, AT&T will also still own a host of streaming services from Boomerang to Rooster Teeth. And live channels like TNT, TBS and CNN. How AT&T winds those down or incorporates them into HBO Max and AT&T TV is a giant open question.
Then it comes to subscribing itself. Which Alan Wolk describes how confusing it will be here. He’s not wrong.
AT&T”s biggest hurdle is still itself and all the internal turf wars they need to overcome. Offering just one streaming service and just one live-TV service is key to simplifying things for customers. Will they get there? At this point, it’s tough to say. (This remains Netflix’s biggest advantage.)
Other Contenders for Most Important Story – The Rest of the Battles
Seriously, this week went wall-to-wall with news. I could have picked any of the following story for a most important candidate if HBO Max hadn’t done it’s thing. So quickly on them.
Apple TV+ Launches
Today, as I launch this, Apple TV+ is available for everyone who wants to watch one of 9 shows. (27 episodes I believe.) I haven’t bought a device this year and see no reason to pay $5 for any show, but will try to check it out.
Disney Monday Marketing Blitz
According to a story in The New York Times, on Monday Disney started to unveil the full, cross-platform, synergistic power of its marketing campaign for Disney+. I didn’t really notice anything different, and the results won’t be known until Disney’s quarterly earnings, but we should note this will be another pressure on bottom lines: marketing costs are increasing as much as production costs. (Disney has the edge here.)
Playstation Vue Shutting Down
See! This definitely would have led the week in any other week. Vue was one of the pioneers in “virtual multi-channel programming video distributors” (vMVPDs), but could never quite get over the hurdle with customers. Indeed, until this week I assumed it was only available on Playstation, since it had that branding. (Another warning sign for AT&T TV: folks will assume they can’t get it if they don’t have AT&T.)
Financially, we should be further aware of the viability of the other vMVPDs and OTT bundlers–Hulu Live TV, Youtube TV–out there in the world. Right now, it seems like folks are subsidizing all vMVPD viewership without a truly sustainable way to get to profitability short of raising prices (or crushing costs for cable channels). Arguably, streamers are making the same bet, but the costs add up much more quickly for vMVPDs than SVODs.
Two “V” named digital video platforms shutting down in the same week? Well, not quite. See, Walmart hasn’t officially sold Vudu yet, merely realized that to compete in the streaming wars may require billions it doesn’t want to spend.
Financially, we should be further aware of the viability of the “use TV to sell socks/cellphones” plan. My gut is Walmart looked at the costs of competing in streaming (say the reported $6 billion planned by Apple) and realized that if that bet was wrong on streaming–that more videos didn’t sell more stocks–they’d decimate their free cash flow. This stands in contrast to Amazon who has made that bet. The difference may come down to the fact that Amazon makes a bit more in cash–and an AWS engine driving this cash flow–but has a much higher valuation to support its adventures. Walmart doesn’t have as much room to play with their stock price before it would go down.
Netflix is Releasing The Irishman in Theaters
Not to take the week off, Netflix’s token run of theatrical release for The Irishman starts today. While most Netflix movies don’t get their own section in this newsletter, they hype and anticipation for this film cannot be undersold. At all.
Amazon Prime/Video/Studios Releases Jack Ryan
My working theory is that this is one of Amazon’s most popular shows, which shows in the last 12 months of interest data. According to Google Trends, it’s probably fifth in interest, depending if you measure peaks or valleys in interest. Also, since it isn’t critically buzzy, it probably under-indexes in this search traffic data.
Which makes this release date a pinch curious for me, since it is going to end up being one of the most crowded days to get attention and on Halloween, when folks aren’t really in the mood for a gritty spy thriller, as opposed to horror films.
Data of the Week – Kevin O’Reilly Displays My Favorite Chart
Meanwhile, Kevin O’Reilly explains my favorite chart in entertainment:
Yep, that seems right. Notably, if you bucketed each show by percentage of viewership, and know that Amazon/Netflix has thousands of shows, you get to my histogram.
Entertainment Strategy Guy Update – A Big Week for Game of Thrones and Star Wars
Meanwhile, one Game of Thrones prequel ends, another gets a straight-to-series order and the former showrunners of GoT leave a Star Wars trilogy. Not a ton of lessons, but it does show the fragility of trying to manage these huge universes, and clearly even Disney doesn’t run it perfectly.