The CEO of WarnerMedia wants his new Chairman of Direct-to-Consumer to deliver Netflix-sized subscribers. They are banking on the greater-company approach to get the job done.
WarnerMedia CEO wants “Netflix-sized” audience
WarnerMedia chief John Stankey has bold objectives for the Impending direct-to-consumer (DTC) service promised for later this year. He is not content with the 5 million or so HBO Now subscribers. He has his eye set firmly on Netflix-size market penetration:
“In an environment where media is moving to scale and where consumption needs to be in scale, no longer is having 25 percent the market an acceptable equation. The reason we’re putting the WarnerMedia companies together is to build a scaled product so we can aggregate the kind of audiences we need moving forward, so we have a relationship with 60 to 70 percent of the homes in the United States.”
To get there, Mr. Stankey instigated a management shakeup that resulted in the heads of both HBO and Turner leaving the company. He wants all WarnerMedia brands working together to build the new direct-to-consumer service. Under Time Warner Inc’s management, the brands operated independently.
WarnerMedia entertainment head sees challenges
To oversee the transition within WarnerMedia, Mr. Stankey hired Bob Greenblatt as chairman of WarnerMedia Entertainment and Direct to Consumer. Mr. Greenblatt is a seasoned TV executive who successfully steered media brands like NBC and Showtime to new heights.
Mr. Greenblatt took the reigns officially at WarnerMedia this week. In an interview with Variety, he was asked where he saw the opportunity for the WarnerMedia streaming service:
“Will we be as voluminous as Netflix? No. Do we have the plethora of name-brands as Disney? No. What we do have are brands that are really significant starting with HBO.”
On the face of it, his statement does not sound very promising, at least from the perspective of Mr. Stankey’s broad goals for the service. So, how does Mr. Greenblatt think he can drive the DTC offering into 60+ million US homes?
The greater-company concept
Speaking a few months after the AT&T Time Warner deal received final approval, David Beck Executive Vice President, Corporate Strategy & Operations, Turner, saw the marriage of the two companies this way:
“The future of television is going to be optimizing for the greater company, without a doubt.”
He also gave a taste of what “optimization” looks like:
“AT&T is bundling HBO in with your data plan. But that is no different than Amazon bundling Prime Video with Prime Service.”
Mr. Greenblatt expects the greater-company concept to be the power behind WarnerMedia’s growth:
“AT&T is the world’s largest telecommunications company with direct relationships with millions of consumers already. If we can harness the knowledge this company has and the data and the relationships they have to put products in the hands of consumers — that gives us real scale and potency to launch something.”
With 153 million wireless subscribers, AT&T has a billing relationship with nearly half the population of the United States. Add on 14 million broadband homes, and it’s hard to think of a company (outside of Verizon) with such an impressive reach.
Bundling doesn’t always work out well
AT&T has already used bundling to help boost DirecTV Now. It helped propel the vMVPD’s subscribers to 1.8 million within 18 months. However, it turns out many of those subscribers signed up with a special wireless promotion at a deep discount. When the discount ended in Q4 2018, 270,000 subscribers left.
That said, Mr. Stankey suggested in a recent interview the price of the new service would be much lower – $10 to $15 – than DirecTV Now. Therefore, it shouldn’t be as vulnerable to mass defections when the promotions end.
Can discounts and wireless promotions deliver 60 million subscribers? It sounds ambitious. However, it seems likely we are about to find out.
Why it matters
WarnerMedia executives want the new direct-to-consumer service to deliver Netflix-sized subscriber numbers.
However, the service will not have anywhere near Netflix’ content depth and breadth.
AT&T is banking on cross-promotion with wireless customers to get it to 60 million subscribers.
 HBO NOW is $15 and the WarnerMedia service will presumably contain more content, so proposed price range is aggressive.