John Stankey, the AT&T executive now charged with overseeing HBO and other Time Warner properties, sounds like he wants HBO to become more like Netflix by producing more programming that can be consumed throughout the day, rather than weekly, according to a report published Sunday. But while Netflix is way more valuable than HBO, HBO's "quality over quantity" model greatly outshines Netflix when it comes to profit. Basically, it sounds like Stankey "wants to both have his cake and eat it," says Felix Salmon. As Salmon explains, Stankey says "that he wants more profits from HBO—that while HBO is currently making money, it’s not making enough. The problem is that if he starts ploughing billions of extra dollars into the HBO budget—the kind of money that would enable the unit to put out more content and get more hours a day—then that will bring the unit’s profits down, not up. Spending more money on premium content will probably bring in some new subscribers, but not nearly enough to cover the cost of the new content. That’s why the old Time Warner never did it. Lowering the cost of a subscription would also bring in new subscribers, while reducing profits and angering many cable operators. HBO was the crown jewel of Time Warner precisely because it was so incredibly profitable, year in and year out. If Stankey wants higher revenue, he can get that through investment. He can get more engagement, too. But he’s probably deluding himself if he thinks that he can hit the trifecta and get higher profits to boot." Salmon adds: "It makes sense for Stankey to want to compete with Netflix, but HBO is simply not the best platform to use to do so. HBO cares about nothing more than its reputation for quality: It will make Veep, but it would never make Fuller House. That obsession has turned it into one of the most valuable brands in the media world. HBO is worth much more than the $4 billion that Disney paid for Lucasfilm, plus the $4 billion Disney paid for Marvel, plus the $7.4 billion Disney paid for Pixar: The New Yorker estimated it was worth more than $30 billion in 2015, and it has surely increased in value since then. "
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TOPICS: HBO, Netflix, Westworld, John Stankey, AT&T, Prestige TV