HBO Max's plan to lure viewers from Netflix

Kevin Reilly, HBO Max chief content Officer,

By Meg JamesStaff Writer

July 31, 2019 4 AM PT

Kevin Reilly has one of the best jobs in entertainment or, perhaps, one of the worst.

The battle-tested television executive is chief content officer for WarnerMedia’s upcoming streaming service, HBO Max, which is scheduled to launch next spring. The stakes are high for parent company AT&T. The telecommunications giant misfired on its 2015 purchase of El Segundo satellite TV provider DirecTV, and now it must prove that last year’s $85-billion takeover of entertainment company Time Warner Inc. was a wise bet.

“It’s been clear to me from the get-go that they’re playing to win,” Reilly said in an interview last week in his industrial-modern office in Burbank that overlooks the historic Warner Bros. lot.

The video-on-demand service, which Reilly has nicknamed “Max,” is the top priority for John Stankey, the longtime AT&T executive who became CEO of WarnerMedia last year when AT&T swallowed Time Warner and changed its name. AT&T sees HBO Max as a bridge between its new properties — HBO, Cartoon Network, TBS, TNT and the Warner Bros. studio — and its core wireless phone business. AT&T’s goal is to keep customers in the fold with easy access to high-quality television shows.

But HBO Max will launch in an increasingly crowded market already dominated by Netflix, Hulu and Amazon Prime Video. Others, including Walt Disney Co., Apple Inc. and Comcast Corp.’s NBCUniversal, are swarming the field too. The highly anticipated Disney+ is scheduled to debut in November at $6.99 a month.

HBO Max is expected to be the most expensive, with analysts predicting that the service will be offered for $17 to $18 a month. By comparison, Netflix charges about $13 a month.

Some in Hollywood openly question whether HBO Max will click, particularly after AT&T’s struggles with DirecTV and its DirecTV Now streaming offering. The company has lost 2 million television subscribers in the last year, far more than other pay-TV providers amid a wave of cord cutting.

“There is a guilty-until-proven-innocent perception among some observers,” Colby Synesael, a telecommunications analyst with Cowen & Co., said. “A lot of that comes from the history of, not just AT&T, but also others in the telecom industry that have struggled when going outside their wheelhouse. ... It really puts the pressure on AT&T to create a successful platform. It’s going to come down to the execution.”

Enter Reilly. In December, the veteran TV executive, known for his programming acumen, was tapped as architect of the creative identity and programming mix for HBO Max. Reporting to Stankey, he helped assemble a team of executives to build the service from scratch, with the help of a technology group in Seattle. Reilly declined to say how much money AT&T has allocated.

“It was really about: ‘Generate the strategy and tell us what it’s going to take,’” he said.

But culture clashes during the first year of AT&T ownership have been apparent. WarnerMedia executives spent much of the last year unsettled, uncertain about their standing or even how to approach the gruff, 6-foot, 5-inch Stankey. They questioned whether he fully appreciated HBO and other assets such as Film Struck, a beloved streaming service devoted to classic movies that Stankey eliminated last fall. Stankey was unavailable for comment.

Tensions culminated in late February with a dramatic corporate purge. The longtime chairman of HBO, Richard Plepler, and president of Turner, David Levy, departed. Stankey quickly brought in Bob Greenblatt, former NBC chief, in the newly created role of chairman of WarnerMedia Entertainment. Now Greenblatt is in charge of HBO, Turner channels and the new streaming service.

Reilly had a new boss — again.

The shake-out was healthy, Reilly said. Not only was Greenblatt a longtime friend and industry colleague, but the reorganization forced executives to get on board with Stankey and his mandate that executives must collaborate.

“Everyone got the memo very quickly when John set the priority that we are doing this,” Reilly said, referring to the new service.

As Reilly sees it, he has a unique opportunity to help steer his company through a major technological shift that has upended television.

“I’ve been excited from Minute One,” Reilly said. “We’ve been toiling in this very weird environment now for a decade, and with each progressive year it’s gotten weirder and weirder. I had a front-row seat watching [the disruption] happen at the networks. It wasn’t fun.”

On a TV streak

Reilly has one of the longest hitting streaks in television.

The 56-year-old Long Island native has overseen entertainment for six networks, including two of the four major broadcasters: Fox and NBC. Over the years he has been involved in the creation of “ER,” “The Sopranos,” “Just Shoot Me,” “NewsRadio,” “Glee” and “30 Rock.” While at FX more than 15 years ago, Reilly helped spark the trend known as “peak TV” by introducing edgy originals, including “The Shield,” to the basic cable channel. He became NBC’s entertainment president in the final year of “Friends” and ordered “The Office,” which became NBC’s next big hit.

Today, “The Office” and “Friends” are the two most popular shows on Netflix, according to Nielsen.

Netflix used network shows that Reilly and others developed to help build the world’s dominant streaming platform. Now, Reilly must find a way to create a compelling slate to draw viewers away from Netflix.

“So many ironies in retrospect,” said Reilly, who also remains president of cable channels TBS, TNT and TruTV (he does not oversee HBO programming). In May, WarnerMedia extended his contract through 2022.

Reilly’s corner office is two doors from the glass-walled conference room that Greenblatt moved into earlier this spring when he joined the company.

“I’ve known Bob forever,” Reilly said, noting that when he was at Brillstein Entertainment, he sold Greenblatt (then at Fox) David Chase’s pilot for “The Sopranos.” Higher-ups at Fox passed, and the show found its home at HBO. “We don’t have the exact taste, but there’s a mutual respect. And Bob’s management style is such that he gives you a very big lane — so we’re not stepping on each other.”

Contours of the service are emerging even as the company withholds key details, including programming budgets, content mix, marketing strategy and the price. AT&T plans a big reveal in late October to wow Wall Street. AT&T Chairman and Chief Executive Randall Stephenson told analysts last week that HBO Max eventually would offer live content, potentially NBA basketball.

The service initially will have 10,000 hours of programming, drawing heavily from WarnerMedia’s assets. It will showcase HBO originals, including “Game of Thrones,” “Big Little Lies” and “Silicon Valley.” It will have a robust offering of Warner Bros. movies, potentially the “Harry Potter” franchise and classics like “Casablanca.” CNN will provide documentaries. And there will be shows from the industry leader, Warner Bros. Television, including 236 episodes of “Friends” that WarnerMedia is pulling from Netflix.

There’s a bounty of cartoons within the library, including Looney Tunes and Hanna-Barbera programs, including “The Flintstones” and “Scooby-Doo” and the contemporary hits “Adventure Time” and “Rick and Morty.”

WarnerMedia executive Sarah Aubrey is leading the effort to create original shows for HBO Max. More than 30 new original shows are being developed for the service, said Greenblatt. Some will be designed to appeal to young women, such as a spinoff of CW’s millennial hit, “Gossip Girl.” There also will be fare for young men.

“The whole family can walk down the aisle and find something, but it is not the superstore,” Reilly said, in a reference to Netflix. “We’re not loading everything in there just because we have it.”

The service will be built with parental controls to deny children access to such shows as “Sex and the City.” Reilly said that WarnerMedia plans to rotate movies on and off HBO Max to keep it fresh.

“It’s all about how we create something that is irresistible, and that has HBO at its center,” Greenblatt said in an interview. “It’s almost like we are creating another, separate network for all of these new shows that are going to complement HBO and reach different demographics: millennials, young adults, children and families.”

‘Mutual respect’

The concept of a “separate network” is one reason the new service will be called HBO Max.

The moniker isn’t universally loved. Some within HBO worried about the dilution of the HBO brand. The name also gives short shrift to the nearly 100-year legacy of Warner Bros., which has been producing the shows and movies that are expected to make up the backbone of service.

“We definitely wanted two personalities,” Reilly said. “Max was a name that emerged pretty early on. I liked it. ... It’s kind of a double entendre that promises more, but it also can live as a clean, standalone word, unlike ‘HBO Bundled,’ or something un-sexy like that.”

But with the HBO mantle comes “the burden of the brand,” said Eunice Shin, a Los Angeles partner at Prophet, a brand and strategy consulting firm.

“People pay a premium for HBO because they perceive that they are getting premium, quality content,” Shin said. “So the question is: Is the HBO Max brand going to be consistent with the HBO brand?”

The 8 million subscribers of HBO’s existing streaming options, typically offered at $15 a month, are expected to be offered an upgrade to HBO Max. Analysts suspect that AT&T will heavily promote the new service as an add-on to its cellphone service and TV packages. The company boasts more than 100 million mobile subscribers in the U.S., and the new streaming service could be key as the industry introduces next-generation 5G phone service, making it easier to watch TV on phones.

Eventually there will be a version of HBO Max with commercials but, for now, it will be ad-free.

“They have a massive advantage because they are starting with HBO as a base,” said Michael Pachter, digital media analyst with Wedbush Securities in Los Angeles. “And if you have HBO, you can pay a few dollars more and get HBO Max. The up-sell will be easy but the hard part will be attracting new customers.”

Pachter noted that HBO’s numbers in the U.S. have remained steady for years — around 35 million subscribers. That means two-thirds of U.S. television households don’t subscribe to HBO.

Another challenge will be the cluttered market.

“I can’t think of a time when there have been so many product launches, and all of these companies are competing for the same market,” Shin said. “There’s going to be so much television out there and people aren’t going to be loyal to any one service. I don’t think anyone knows how this is going to play out in the next two to three years.”