HBO’s Anti-Netflix Strategy Is Walking Out the Door

(Bloomberg Opinion) -- On Thursday night, I went to the premiere of “The Inventor,” a documentary about the rise and fall of Elizabeth Holmes and Theranos, the company she founded to disrupt the blood testing business, but which turned out to be a fraud.

It was an invitation-only event, in the HBO screening room on the 10th floor of the Time-Warner building in New York, with a dinner afterward at Porterhouse, a steakhouse also in the Time-Warner building. In his remarks before the film, the director Alex Gibney noted that this would be the last HBO premiere in this locale; now that the courts had ruled in favor of the AT&T-Time Warner merger, the company would soon be moving to Hudson Yards, a sparkling new complex of high-rise buildings on Manhattan’s west side.

Then Gibney dropped a bombshell. “The Inventor” was also the last film that would be made by HBO under the leadership of Richard Plepler. Plepler had first joined HBO in 1992 as a member of the communications department, but had risen to become co-chief executive in 2007, and then sole CEO in 2013. The cognoscenti, in New York and Hollywood, had long viewed him as the public face of the premium network. Gibney announced that Plepler — “a powerful impresario and creative force,” Gibney called him — had announced earlier that day that he was resigning. There were audible groans from the audience.

I always thought — unfairly — that Plepler was New York’s most unlikely taste-maker. With his perennial tan, his George Hamilton looks, and his open-collar white shirts, it was easier to picture him on a yacht in the French Riviera than giving green lights to such landmark shows as “Game of Thrones” and “Veep.”  But he had a voracious curiosity, a big appetite for risk and extremely high standards: He believed that you had to spend money to make money, and for HBO at least, he was right. The final season of “Game of Thrones” is said to cost a staggering $15 million an episode. But shows like “Game of Thrones” drove subscriptions; between its debut in 2011 and 2018, HBO’s subscription revenue went from $3.8 billion to $5.6 billion. And it was generating $2 billion in annual profits.

He also took risks on the business side: Under Plepler, HBO was the first legacy network to untether itself from the cable distributors. After establishing HBO Go — a streaming service that required a cable subscription — he started HBO Now in 2015 for TV consumers who had cut the cord. In three years, it has well over 5 million subscribers.

One of Plepler’s predecessors at HBO was his boss, Time Warner chief executive Jeff Bewkes. Because he understood the business — and trusted Plepler — he largely left Plepler alone. In turn, Plepler gave his creative team lots of runway, which is a big reason they all adored him. What he cared about, they knew, was that HBO shows had to stand out for their excellence. That was in contrast to Netflix, which emphasizes quantity over quality on its video streaming service. And it worked: As of January, Netflix had about 140 million subscribers worldwide. But HBO had at least as many. It was the one legacy network that was succeeding in going head to head with Netflix.

The rumbling is that Plepler decided to resign when it became clear that he was not going to have the same freedom under AT&T that he had under Bewkes. But it was also because AT&T had made it clear that it wanted the HBO business model to change. Warner Media — as AT&T’s Time Warner unit is now called — is expected to start a streaming service that will include Warner Bros. movies, shows and movies from Turner, and HBO. AT&T executives have also made it clear that they expect HBO to ramp up its content, to better compete with Netflix.

Maybe a streaming service like Warner Media will succeed — it’s hard to know. But forcing HBO to start churning out shows on a Netflix-like pace will almost surely backfire. Netflix can get away with it because, well, it’s Netflix. If HBO starts putting out mediocre shows, its audience will disappear. Plepler taught viewers to expect something more from HBO. AT&T has every right to dump Plepler for its own executive. But if it turns its back on the model he perfected, it does so at its own peril.

Disclosure: Like many New York journalists, I had a small consulting gig with HBO in the aftermath of the financial crisis, when Plepler was trying to figure out how to portray the crisis on the screen. HBO wound up adapting Andrew Ross Sorkin’s “Too Big to Fail.”

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. He is co-author of “Indentured: The Inside Story of the Rebellion Against the NCAA.”

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