WarnerMedia’s HBO used to market itself with the tagline “It’s not TV. It’s HBO.” to signal that the premium cable channel, known for such hits as “The Sopranos” and “Game of Thrones,” was special. But the company’s forthcoming streaming service, HBO Max, faces a more complicated marketing challenge: It is neither TV nor HBO.
HBO Max and HBO are separate services—HBO Max will offer more programming, including shows from Warner Bros., TNT and TBS as well as HBO, and will likely cost more than HBO. But WarnerMedia executives decided that the new service’s name should include ‘HBO’ because it is the company’s strongest consumer brand. That decision followed an internal debate, as top HBO executives such as then-chief Richard Plepler raised concerns about the implications of using the HBO name, according to former and current employees.
• Company aims for 50 million subscribers in 5 years for HBO Max
• Executives held lengthy debates over branding
• Company discusses distributors offering streaming service to HBO subscribers
Among the issues they raised was that by tying the new service to HBO, both as part of the name and in its programming, WarnerMedia risked alienating the cable and satellite operators that carry the HBO cable channel. Those firms could see the new service as a direct competitor to HBO, said people familiar with the discussions. That could require costly renegotiation of those agreements.
Some other WarnerMedia executives also worried that relying on HBO’s brand name could complicate the company’s hopes of attracting a broader audience than the premium channel, which has a relatively narrow audience that isn’t strong with families. That’s important for WarnerMedia’s hopes of competing with Disney’s upcoming service—called Disney Plus—given how strong the Disney name is with families. At the same time, some say it could hurt HBO’s brand by making less clear what it stands for.
“What HBO stands for is absolutely going to take some form of perception hit over time,” said Mario Natarelli, managing partner at MBLM, a New York–based branding agency. While he says HBO is WarnerMedia’s strongest brand, he also noted that HBO doesn’t have the same brand recognition amongst younger audiences as Netflix does. As a result, WarnerMedia will have to redefine what HBO means, he said.
Those issues highlight the challenges for AT&T in launching the new streaming service that both competes for viewers with its hugely profitable cable channels and relies on the channels for programming and marketing. Disney faces similar issues as it also prepares to launch its Disney Plus at the end of this year. Disney, for instance, is taking programming off its Disney channel for its new service. Both companies have little choice, however, as consumers increasingly cut the cord of cable and shift to streaming.
The stakes are high, particularly for AT&T, which bought the company previously known as Time Warner a year ago for $85 billion and subsequently renamed it WarnerMedia. It has to justify the price paid for the deal by generating earnings growth. AT&T hopes it can sell HBO Max to its combined 125 million-plus wireless and video customers in the U.S and eventually expand abroad. It also hopes to use the audience data it collects to feed more targeted advertising, generating more ad revenue.
WarnerMedia’s goal is to hit around 50 million subscribers, including HBO’s existing 35 million subscribers, within the next five years, according to people familiar with the situation.
What’s in a Name?
How central to make HBO in the new service’s marketing was a subject of debate from the early days of planning for the new service, last fall.
Early on, executives planning the service tossed around lots of different names, including some that riffed off WarnerMedia’s name. But top executives planning the service, such as content chief Kevin Reilly and then–general manager Brad Bentley, wanted to use HBO in the name in part because it was the strongest brand name in WarnerMedia.
But Mr. Bentley, a former DirecTV executive installed by WarnerMedia CEO John Stankey to oversee development of the service, wanted to go broader. While he agreed on the value of the HBO name, he wanted to add the word “Max” to the name to make clear that the new service would have a lot more than just HBO. He even suggested that eventually HBO could be phased out of the name altogether.
His argument was that HBO wasn’t strong with audiences like families, which is a big potential new audience for the new service given the amount of cartoon programming it will be able to run from its Cartoon Network and Warner Bros. library.
Meanwhile, executives then running HBO—including CEO Richard Plepler and global distribution President Bernadette Aulestia—had separate issues. Mr. Plepler was worried about HBO’s brand being diluted by the service carrying other types of programming and running ads—ideas that had been floated by WarnerMedia executives at that point—according to a person close to him.
He suggested that if WarnerMedia were going to use the HBO brand for the new service, it should offer a service that ran more HBO-like programming as well as programs from HBO’s secondary premium channel Cinemax. Cinemax shows include turn of the century medical drama “The Knick” and martial arts drama “Warrior.”
Ms. Aulestia said that using the HBO name could upset the company’s cable and satellite partners, according to people familiar with those meetings. Those firms carry and market the HBO cable channel and the new service, using the HBO name and its programming, could appear to directly compete with it. She argued that if the service carried the HBO name, it should be offered to customers in partnership with cable operators. One way to do that would be to let cable operators bundle the streaming service with their broadband offerings.
A person close to WarnerMedia acknowledged there are potential issues with cable and satellite firms over use of the HBO name and programming, but it was the strongest brand name the company had, market testing showed. That person said WarnerMedia could offer cable operator sweeteners to overcome any issues they have with the new service.
The thinking inside WarnerMedia about how to deal with cable operators has evolved. Initially, Mr. Bentley pushed for the company to only sell the service directly to consumers, rather than striking any broadband bundling deals with cable operators, people familiar with the discussions said. But, more recently, WarnerMedia executives have discussed letting cable operators give HBO Max to customers who already pay for the HBO cable channel, said people familiar with the situation.
Executives have also discussed trying to get cable operators to pay for the right to bundle HBO Max with their existing offerings, such as their broadband service. Cable operators now typically have more broadband customers than TV subscribers, thanks to cord-cutting.
Giving the service free to existing cable subscribers would have a big revenue impact, however. As it is, the new service is likely to cost an enormous amount of money in additional programming. WarnerMedia is discussing pricing the new service around $16 per month, according to people familiar with the situation, a dollar or two more than HBO on cable or the HBO Now standalone streaming service.
If it doesn’t get any incremental revenue from HBO subscribers, it will have to sign up a lot of other paying subscribers to generate the revenue needed to offset the additional programming costs of the service. If cable operators pay a fee to bundle the service with broadband, WarnerMedia will only get a portion of the price. Either way, the service could hurt WarnerMedia’s earnings at a time when AT&T is looking for ways to raise its profits, given the debt it took on to buy Time Warner.
The intensity of these debates receded over time as many of the HBO executives, including Ms. Aulestia and Mr. Plepler, left the company. Mr. Bentley was forced out in May after clashing with Robert Greenblatt, appointed in February to oversee programming for WarnerMedia. When he came in, he wanted to take a fresh look at planning for the streaming service. As for cable operators, it is unclear whether any have ever raised any complaints about the new service.
In July, WarnerMedia announced the new name and the team leading the content strategy for the service. It also revealed that the new service would have exclusive rights to stream Warner Bros.’ 1990s hit sitcom “Friends” when it launches in the spring of 2020. “Friends” has been streaming on Netflix in recent years where it has remained popular, so taking it off Netflix is a big win for HBO Max.
WarnerMedia plans to give a presentation about the new service to Wall Street analysts and the media at its Burbank studios in late October.
One of the big questions remains marketing, particularly as HBO has always relied on cable and satellite operators—and more recently tech giants like Amazon and Apple—to sign up subscribers.
“The HBO experience has always been a good one and the question now is can they translate that into a digital direct-to-consumer proposition,” said Mark Greenberg, the former CEO of premium channel Epix, who has also worked at HBO and Showtime. “The good news is they have a guy like Bob Greenblatt architecting their content strategy.”