AT&T Begins Trying To Screw Up HBO In Earnest

Failures

from the ill-communication dept

If you haven’t noticed by now, big telecom companies aren’t particularly good at wandering outside of their core competencies. They’ve been government-pampered monopolies so long, innovation, creativity, and competition are concepts that are utterly foreign to their underlying genetics.

Nowhere has that been more apparent than big telecom’s attempt to pivot to streaming and online advertising. Verizon’s first foray into media, you’ll recall, was a short-lived “tech news” website called Sugarstring, which was quickly shuttered after the telco banned its reporters from discussing subjects like net neutrality or government surveillance. That was followed by a botched joint venture with RedBox. And Verizon’s failed Go90 and Oath efforts, which involved mashing together two failed nineties brands (AOL & Yahoo), then pretending that would be enough to do serious battle in the space.

AT&T is now following closely in Verizon’s footsteps in the wake of its $86 billion merger with Time Warner (and HBO). The company this week made more than a few headlines when news broke that longtime HBO CEO Richard Plepler, responsible for the lion’s share of HBO’s success over the last 29 years, would be stepping down. The reason? While most news outlets beat around the bush, it’s because he had a hard time getting along with hard-headed AT&T executives:

According to people familiar with the matter, this is an issue of autonomy. Plepler wanted to run HBO, and new WarnerMedia CEO John Stankey, an AT&T veteran, was effectively running HBO. Plepler had ideas about technology and international expansion that didn’t jibe with Stankey’s vision, according to a person familiar with the matter. The two are also “different people” and didn’t have the closest relationship, another person said. So after six years of running HBO autonomously, Plepler told Stankey earlier this month he wanted to leave, two of the people said.

If you’ve been watching this saga unfold, that shouldn’t be surprising. Hints of trouble in the new union emerged last summer during an all hands on deck meeting, where AT&T executives effectively told HBO executives they should stop focusing on this whole quality thing, and begin thinking about quantity and user data monetization:

(AT&T’s John) Stankey described a future in which HBO would substantially increase its subscriber base and the number of hours that viewers spend watching its shows. To pull it off, the network will have to come up with more content, transforming itself from a boutique operation, with a focus on its signature Sunday night lineup, into something bigger and broader.

?I want more hours of engagement. Why are more hours of engagement important? Because you get more data and information about a customer that then allows you to do things like monetize through alternate models of advertising as well as subscriptions, which I think is very important to play in tomorrow?s world.?

Except creatives do their best work with a healthy degree of autonomy from left-brained bean counters. They don’t want the god-damned phone company, for which creativity and innovation is an foreign construct, meddling too heavily in their production decisions. And not too surprisingly, a number of HBO and Time Warner employees have groused to Recode’s Peter Kafka that AT&T doesn’t really have any idea what they’re doing (a point kind of downplayed in his piece):

More recently, when I called an HBO source to get their perspective on AT&T?s plans for WarnerMedia, that person described the plans as ?inchoate,? an adjective that has rattled in my head ever since. If they?re willing to say that to a reporter, imagine how they really feel.

I’ve studied AT&T for twenty years of my adult life. This is a company whose leadership is really very good at a long list of things. They’re good at running networks (usually), lobbying the government to hamstring competition, and finding creative ways to rip off its own customers, taxpayers, and even the disabled. What they’re not so good at is creativity, innovation, and actual competition, since their near-total domination over state and federal regulators–and the lack of competition in their broadband businesses–means those particular attributes have rarely been exercised.

Like Verizon, AT&T has spent the better part of the last two decades getting millions in taxpayer subsidies for fiber networks that were never fully deployed. Also like Verizon, AT&T executives have a bone-grafted jealousy of Silicon Valley’s domination of online advertising and video. But both companies have no earthly idea how to get there without cheating. As a result, their efforts quite often wind up looking like a doddering grandpa who is simply trying too hard to fit in:

AT&T first thought it would be a good idea to pay $67 billion for satellite TV provider DirecTV on the eve of the cord-cutting revolution, seemingly oblivious to the fact that satellite TV was just about to become irrelevant. That fact was quickly made obvious by the massive video subscriber losses AT&T and DirecTV have witnessed as users quickly cut the cord for streaming alternatives. While the deal’s initial subscriber growth provided some benefit in terms of greater leverage in programming negotiations, they’ve been bleeding subscribers ever since. It was the first big hint that AT&T didn’t actually know what it was doing.

AT&T then spent another $86 billion to acquire Time Warner, hoping that control over this must-have content would somehow magically cement its supremacy in video in concert with the DirecTV deal. But the mammoth debt from both mergers quickly drove AT&T toward nickel-and-diming both customers and competitors alike in a bid to get its financial head above water. This resulted in competitors like Dish dropping HBO from their lineups entirely due to cost, and even its newfound streaming customers have been fleeing for the exits in record numbers due to price hikes.

A lot of AT&T’s thinking is typical of big telecom, where growth for growth’s sake is encouraged and executives think you can merge your way to success. And while that might work in the competitively-addled broadband sector, the tight-margin, ultra-competitive streaming space is an entirely different animal. AT&T allegedly now wants to fuse HBO with Turner Media with an eye on churning out shorter-form, quickly-monetizable schlock at scale. It’s the precise opposite of why HBO, one of several companies they just spent billions on, has long been so successful.

AT&T is a company for which ethics, quality, and creativity are alien phrenology, and if you’ve spent more than five minutes watching AT&T do business, it’s apparent in everything it touches. Plepler smelled the odor on the wind and got out while the getting was good. Other talent is going to follow, and the brain and talent drain is going to create entirely new issues. While it’s likely HBO will continue trucking along semi-functionally for a few years on the backs of projects already in the pipeline, it’s hard to think AT&T’s influence won’t have a decidedly negative impact on the pioneering channel over the long term.

Even AT&T’s knack for cheating and lobbying aren’t likely to save AT&T from its own bad impulses, or secure supremacy in the face of something entirely foreign to the Dallas-based telecom giant: actual, meaningful competition.

Filed Under: content, john stankey, over the top, richard plepler, streaming, telcos
Companies: at&t, hbo, time warner