Netflix is a production company of peerless scale when it comes to TV. It’s projected to spend $12 to $13 billion on original programming in 2018; meanwhile, HBO spent $2.5 billion on its shows in 2017. Netflix’s strategy is to overwhelm, pumping out fresh content at its subscribers and relying less and less on licensed material it doesn’t own. HBO has always had more of a “prestige” bent, taking a very long time to develop its shows and launching them with extreme fanfare, with an eye toward awards. But Stankey seems to view that deliberate pace as a result of laziness, and his desire to upend the network’s careful approach to putting out new shows (it only makes a handful per season) could mean the end of HBO as we know it.
“It’s going to be a tough year,” Stankey said the June meeting, according to a recording the Times obtained. “It’s going to be a lot of work to alter and change direction a little bit.” Expanding HBO’s viewer base would require more programming, released at a faster pace, well beyond the channel’s rotating Sunday night lineup that makes up the core of its original shows. “I want more hours of engagement ... 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,” Stankey said.
HBO’s current profit model is simple but effective. People pay a fee (something like $15 a month) to subscribe; HBO uses that money to license movies and produce TV for subscribers to watch. Because of the company’s longtime reputation for high-quality, Emmy-winning shows like Game of Thrones and Big Little Lies, plenty of people subscribe, and HBO makes a lot of money.
Netflix’s business approach, again, is about scale and is underwritten by investors. The company has focused on getting more worldwide users and hiking its subscription fee to increase revenues. But producing more original shows means Netflix burns through more money—a March 2017 report found Netflix had a negative free cash flow of $2.1 billion. A few months later, the company said in a letter to shareholders that it would remain in the negative for years, but that the investment would crucially help the company spread across the globe.
As he assumes control at Warner Media, Stankey is correct in identifying HBO as the company’s only obvious Netflix rival. But the kind of staggering growth he wants will necessarily disrupt the calculated approach to development that has distinguished HBO for two decades. Due in part to the sheer quantity of its output, Netflix has managed to greenlight some critical hits. But it has not yet won an Emmy for best drama, comedy, or miniseries, while HBO still rules the roost at awards season. The premium-cable network has put out shows like The Sopranos, The Wire, Sex and the City, Deadwood, Six Feet Under, and Veep that helped define the so-called “Golden Age of Television”—which is now receding in the wake of Netflix’s content deluge. In response, Stankey wants HBO to become another titan in this era of streaming behemoths.