6:15am PT by Tim Goodman
Critic's Notebook: Tough Timing and Ugly Optics for HBO and Netflix
Timing and perception worked against both HBO and Netflix in the past week, proving once again that timing and perception are royal pains in the ass.
On the plus side, just because something occurs that suggests worse things lie ahead doesn't mean that those worse things will definitely arise. That probably won't make execs at either entity sleep better, though.
Events started darkly, as they are wont to do in the age of media conglomerates rampantly gobbling up fellow companies because the antitrust watchdogs in this country no longer have teeth. So a telecom guy like John Stankey gets to be a TV content guy, as CEO of WarnerMedia, because AT&T bought Time Warner. That means he can lecture HBO about not being broad enough or making enough shows, in the process scaring the bejesus out of everyone who makes quality television at a place that once famously touted that it wasn't television, it was HBO.
Only now it's just a piece of a much larger portfolio — a sweet luxury car that a telecom guy wants to take a wrench to so it can look blander, be more attractive to the masses and probably break down on the way to Vegas.
Or something like that.
The point is that Stankey pretty clearly hinted that HBO needs to be Netflix, and then in short order HBO's 17-year streak as the most Emmy-nominated content creator came to a crashing end, thanks to Netflix.
Never mind that this was not only inevitable, but arguably overdue. And no matter how much money Stankey throws at HBO to be bigger and broader, it won't reclaim that Emmy title anytime soon. Netflix had 34 Emmy nominations in 2015, 54 in 2016 — when it should have had more, but Emmy voters pumped the brakes out of fear of streamers — then 91 in 2017, when everybody just gave in to the inevitable, and 112 this year, aka The Year of Never Going Back.
HBO had 108, by the way, with vastly less content — which is, not to put too fine a point on it, insanely impressive. But all the Emmy coverage was about Netflix killing that 17-year streak.
All the hot takes about Stankey and AT&T about to ruin HBO by making it some bloated, brand-busting copycat of Netflix's broader, volume-based model are mostly accurate because, well, it's not exactly rocket science. HBO has essentially been in the boutique, prestige TV business and that is, precisely, its brand. That's why people subscribe. They don't subscribe in the hope that it will make Fuller House. HBO also doesn't dominate the rest of the world, seeking subscribers. It is what it is — and if Stankey wants to make it something else then he wouldn't be the first corporate raider to turn a stallion into a donkey and get a bonus for it.
Stankey's AT&T already bought a gigantic entity — DirecTV — in 2015 and had an opportunity to turn a content channel it owned, Audience Network, into something bigger and broader. Unfortunately, nobody at AT&T thought it would be a good idea to rebrand the thing other than with the parent company's omnipresent lettering, so it became AT&T Audience Network, easily one of the worst names currently on TV.
That said — and here's the part about perception not always becoming reality — despite the name, the channel has recently turned out two quality scripted offerings in the drama Mr. Mercedes and the comedy Loudermilk, plus the cult show You Me Her. So, it can be done. And if Stankey just wants to give Casey Bloys of HBO a lot bigger budget and the mandate to keep making great shows, well, sure, getting bigger in the form of more content is a thing that can be achieved without ruining the brand.
And it's not like HBO has a perfect record when it comes to series. It can be a little too niche (High Maintenance, Looking, Mosaic, etc.) and a little too indulgent (Divorce, True Detective, The Newsroom) when dealing with marquee creators. And when it does go broad — like with Ballers — it feels a little off-brand. But those are perfectly fine deviations from what is essentially a midsize high-end brand. Meaning, viewers will accept such excursions as part of the package. In fact, some of those shows are precisely why people subscribe. And when HBO is at its best — Game of Thrones, Westworld, Veep, Silicon Valley, etc., it can prove that "broad" series work when done well. If HBO had 90 or 100 million subscribers, all of those latter-mentioned shows would presumably be even more popular and acclaimed.
The worry is that a mandate to be more "broad" from Stankey will mean that series like Looking or Insecure or In Treatment or even The Leftovers simply won't get made. Worse, what if "broad" in Stankey's view means Ice and Hit the Road, two total clunkers at AT&T Audience Network.
Perception. It's a problem.
And what will Stankey's reaction be if the newly mandated HBO turns out something like Condor, which came out in June on Audience Network and, despite two Academy Award-winning actors in William Hurt and Mira Sorvino, plus Brendan Fraser, quickly got lost in the Peak TV clutter without any trace?
Timing. It's a real thing in TV.
But just when HBO seemed to get the worst of this news cycle and Netflix — fresh off its headline-grabbing 112 Emmy nominations — was basking in a better light, something happened.
Here's the THR headline: "Netflix Stock Plummets on Weak Subscriber Growth." Everybody else trumpeted it as well. If you're a fan of schadenfreude — and that's a Hollywood personality staple — you could sense the glee industrywide. The number of executives who have expressed to me anger about Netflix's spending billions more on content than it actually makes in profit — and predicting a downfall when worldwide subscribers tail off — well, they are numerous. And they might be right. But maybe not right enough to level the playing field.
Announcing its second-quarter earnings, Netflix revealed that it had added 5.15 million new subscribers when it had projected 6.2 million, with the biggest drop being internationally, where it pulled in 4.47 million subscribers after projecting 5 million. The streaming giant lowered its projections for the next quarter both domestically (where the market is pretty saturated) and internationally. All of this just four days after that Emmy glory.
This is the future for Netflix that disgruntled competitors have predicted. The constant overspending in an effort to lock up the market as rivals (Disney, Apple, etc.) get in the game. The mantra, expressed with more doubt in years past, that Netflix was running out of worldwide real estate. A reckoning was coming — from Wall Street.
Are we there yet?
It would be hard to bet against it, given that 2019 will bring Disney, a proven force, into the streaming world in a huge way and Apple, unproven in television but certainly to be feared, right alongside. Hulu is ramping up. Threats are everywhere. It's not just a matter of expecting a smaller piece of the available subscriber pie — domestically, Netflix might have to face subscriber losses. As the other players, including the already established Amazon, start fighting harder internationally, losses could mount there as well.
But if you're taking the long view on Netflix, it can't be this Pyrrhic victory of Emmy rise and stock plunge. The brand is too strong. Its bench is too deep and diverse, and the volume too appealing given the asking price. It is and will remain a market leader. In the years to come, yes, it will pay for its overspending, but its overspending likely cemented its long-term life support. Nobody currently paying for Netflix believes they can plow through the content and suddenly come up disappointed in two years with nothing to watch.
And during that time, Netflix will extend its Emmy nomination title and certainly increase its win totals. Emmy nominations, Emmy wins, Emmy buzz — it all contributes to the same thing: a belief that you need to subscribe.
That's perception, too. It works both ways.
If any number of HBO's upcoming offerings light the imagination of TV lovers (as expected), then somebody will be calling that good timing.
In the meantime, don't be too worried about either company.