HBO joined the AT&T family as part of their acquisition of Time Warner. Now their new parent wants them to be more aggressive in creating and buying content in an effort to compete with Netflix.
In a report by the New York Times, John Stankey, the new CEO of Warner Media (formerly AT&T Entertainment Group) has pressured HBO to grow well past their current 40 million U.S. subscribers and 142 million subscribers Worldwide.
To do this they will have to start expanding their content library to be ‘bigger and ‘broader.’ Currently, the service spends $2B per year on content, as compared to $8B (and growing) that Netflix spends.
This doesn’t come without risk. HBO has averaged $2B in profit per year which is nearly 4x Netflix’s 2017 profits. By adding more content, HBO could risk their reputation of fewer, but higher quality shows.
To AT&T though, HBO is their bet on the future of entertainment. As cord cutting accelerates, their DIRECTV NOW service is a stop gap. But, if the Netflix model is the long-term solution — growing their direct-to-consumer HBO Now service is their best path to compete.