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HBO Is About to Lose 5 Million Customers. It's Not Concerned. - Bloomberg

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HBO is about to lose 5 million customers, and Andy Forssell isn’t worried.

Forssell, the general manager of HBO Max, was a chief advocate for the company’s decision to drop out of Amazon’s channels program, a system the retailer uses to sell different streaming services on top of its Prime video. 

Channels has been a big success for Amazon, which gets to offer its customers hit shows from HBO, Showtime, Starz and Sundance TV within its existing video app provided customers pay an additional fee. The combination of “Fleabag,” “Game of Thrones” and “Billions” all at once is a pretty good draw, and reduces the hassle of toggling between different apps.

HBO has amassed about 5 million subscribers using channels, and losing those customers will impact growth in the current quarter. HBO now has about 67.5 million subscribers worldwide across the premium channel and streaming, the majority of which live in the U.S.

But channels has become a headache for streaming services that now want to have a direct relationship with their customers, and don’t want to allow a third party to control the user interface and billing. 

“It’s important for us to own the customer,” Forssell told me last week. “If the viewer is in the app, we can tailor the home page to them. We can tailor what they show them next. We can respond to that in real time.”

HBO’s decision is the latest sign of a newfound willingness to accept short-term pain for long-term gain at media companies once focused on quarterly results. ViacomCBS, Comcast, Disney and WarnerMedia all need Wall Street to know that streaming is their top priority. And Wall Street is willing to forgive certain speed bumps if they believe the company can pull off the transition from cable to the web.

Joining Amazon channels made some sense to Time Warner back when it was just starting to stream. Time Warner was used to having pay-TV companies like Comcast and Dish sell HBO on its behalf. It was a wholesaler, not a retailer, in industry parlance.

Building an app, handling customer service, analyze churn and retention and paid marketing schematics… this was all gibberish (and uninteresting) to HBO during the Jeff Bewkes, Chris Albrecht and Richard Plepler era.

Amazon offered media companies an easy way to scale up customer base, and it was happy to substitute for the cable companies online. In return, it got a cut of the sales and an opportunity to treat HBO’s biggest hits as though they were its own.

But in time, HBO and others realized they’d made a mistake. They needed a direct relationship with their own customers.

Netflix’s success wasn’t just rooted in being first, or having “House of Cards.” It knew what shows customers watched after they signed up, or the exact moment in an episode they’d stopped watching. It could create new ways to get you to watch the next episode. Or tease a new show.

HBO couldn’t do any of this via Amazon. Under the channels deal, Amazon controls the customer.

This all seems obvious now. But to consider just how focused HBO was on linear TV back then, consider that 2014 it licensed most of its catalog to Amazon. So even though HBO had a streaming service (HBO Go) and was about to launch another (HBO Now), it was letting Amazon have “The Sopranos” and “Sex and the City.” 

Getting out of the channels deal wasn’t easy. HBO Max was unavailable on Amazon devices for several months last year in large part because of HBO’s desire to withdraw. Even now, Amazon reserves the right to communicate with HBO’s customers about how they can continue to watch these shows. It’s unclear if Amazon will help HBO in moving the customers over to Max, but it doesn’t have a lot of incentive to do so.

Forssell says falling out of channels won’t prevent the service from hitting its year-end targets of more than 70 million subscribers. HBO Max has had a strong year thanks to the combination of consistent original programming like “Mare of Eastown” and “White Lotus,” as well as the full Warner Bros. slate of movies.

Yet while media companies are shifting the focus to streaming, they can’t fully abandon their old ways. HBO still licenses its shows to other companies in Canada, the UK and Australia, three of the biggest markets for U.S. streaming services. Netflix has more than 20 million customers in those places, according to research estimates, which vary wildly.

HBO Max won’t have a chance to sign up customers in any of those markets for years to come, which will limit its ability to compete directly. Those deals predate the current leadership of WarnerMedia and HBO Max, and I suspect Forssell and his boss Jason Kilar would not have signed them.

“As you see agreements in other territories come up, were more likely to lean into direct-to-consumer posture than not,” Forssell told me. It’s better late than never. – Lucas Shaw

The best of Screentime (and other stuff)

Fall movie season is in jeopardy

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Addams Family 2

The movie business was supposed to go back to normal this fall. After a year of theater closures, canceled dates and streaming upheaval, movie studios lined up one big release after another.  

And yet, chaos reigns once again. With coronavirus cases rising in many of the world’s most populous countries, studios are trying to decide whether to release their movies in theaters, punt them to streaming or push yet again.

Sony is selling “Hotel Transylvania 4” to Amazon, though it appears to be retaining some of the rights. MGM is releasing “Addams Family 2” online at the same time as it’s in theaters. If the delta variant doesn’t ebb soon, more titles may join the stampede.

But unlike last year, when most studios ended up delaying most of their biggest movies, studios this year are more prepared. Disney, Universal and Paramount have embraced the idea of releasing movies at home and in theaters at the same time, and are now judging movies on a title by title basis.

Tom Cruise may never allow Paramount to release “Top Gun: Maverick” on streaming, but most stars don’t have that kind of sway.

Disney chose to release “Black Widow” online, while “Shang Chi” is going to be exclusive to theaters for a few weeks. Time will tell what it does with its next Marvel movie, “Eternals,” but it can drop it on Disney+ if need be. Universal could shift upcoming releases “Halloween Kills” or “Dear Evan Hansen” to Peacock if cases don’t go down in the next couple weeks.

Sony, MGM and Lions Gate are in a more challenging position since they don’t have a streaming service that can support a major movie.

The one company that comes out of this smelling like roses is Warner Bros. Though many in Hollywood maligned its decision to release its entire slate of movies online as an assault on the movie business, being able to offer new movies at home throughout the pandemic has been a lifesaver for the studio (and a boon for viewers). It’s also helped movie theaters by giving them product to show when other studios are delaying releases.

(There is a similar dynamic at play in music right now. Garth Brooks, BTS and Nine Inch Nails have canceled their tours. But several other major acts and festivals remain on the schedule.)

OnlyFans to ban sexual content

I wrote a lot about this story this week, and I urge you to read our initial story, as well as a piece on how sex workers feel about the decision. (In short: Abandoned.)

Yet it remains unclear why OnlyFans chose to abandon the very content that made it a billion-dollar business.

OnlyFans says it is banning sexual content because of problems it encountered with payment processors. One theory is that this is tied to a crackdown by MasterCard and others following Nick Kristof’s columns about porn sites like PornHub.

If so, there is a sad irony in changes being made to prevent the abuse of women now preventing sex workers from using a site they need. But this has yet to be verified.

There is another explanation, which is that this is all part of OnlyFans’ efforts to take its business into the mainstream. The company is trying to raise money. Some investors love the business but have balked at putting their money into a company so closely associated with pornography.

There is no question OnlyFans was under mounting scrutiny, including two BBC investigations about underage girls and illegal videos.

OnlyFans’ business is so big in large part because of pornography. If it bans sex work, it is betting that its brand is so strong that will be able to grow even bigger without sex workers than it is with them. Whether or not you think this can work, it is unfortunate that sex work still carries the stigma that it does.

Black viewers flock to Pluto, Tubi

Nielsen published a study this week offering a look at which streaming services are most popular among which ethnic groups.

Some takeaways:

Hispanics spend more time watching Netflix than they do Hulu or Amazon Prime, while Hulu and Disney+ overindex among White viewers.

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The audience for free, ad-supported services is less White than normal TV. And Tubi and Pluto TV are especially popular among Black viewers.

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My favorite quote this week

Comes courtesy of Richard Rushfield:

During a time when mis and bad information ran riot, when simple public information campaigns could have saved lives, Hollywood wanted to talk instead about how to increase paydays for talent in a new streaming era.”

Amazon’s big push into live TV

Amazon will air the Academy of Country Music Awards next year, the first time the company has streamed a major entertainment awards show. Unlike Netflix, Amazon has fully embraced live events to help it sell advertising. It’s also got the rights to France’s top soccer league.

Deals, deals, deals

Weekly playlist

Thank you to NPR’s Tiny Desk for introducing me to Joy Oladokun, a singer-songwriter from Arizona who defies genre.

Also, I highly recommend “100-Foot Wave” on HBO Max. (You don’t have to care about surfing to enjoy it.)

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