Don’t Mess with a Good Thing

Last July, I wrote a post arguing that we had to worry about HBO under the ownership of AT&T. This followed a leaked town hall discussion between AT&T’s John Stankey and HBO’s Richard Plepler which was meant to put everyones’ minds at ease about the deal. Yet it did anything but. As I concluded at the time:

Reading all of this, it’s just not clear to me that AT&T understands exactly what it’s buying in HBO. Obviously, that’s not the only reason for the deal. But as noted, it is the “crown jewel”. Instead, AT&T clearly wants the diamond mine the crown jewel came from. And apparently wants the royal court to be the miners. Good luck with that.

So the news this week that Plepler would be leaving the now-merged company is hardly surprising. Yet the apparent reason why he’s leaving is sort of surprising, only in that AT&T can’t possibly be this stupid. No one is coming out and saying it, except all the sources who are saying it behind the scenes.

AT&T is expected to consolidate its TV networks into one division, which would deprive Plepler of the autonomy he has enjoyed.

NYT:

Mr. Plepler found he had less autonomy after the merger, according to two people familiar with his thinking.

Reporting up to Greenblatt alone could have been a reason for Plepler to leave. But the bigger issue, according to insiders, was the idea that HBO wasn’t going to be a standalone unit with its own goals and ambitions.

Contrast this from a report back in 2016 about the deal:

Still, Mr. Plepler said he was comfortable with this shotgun marriage, and for one big reason: He believes he will be able to run things the way he always has.

“Randall made very clear to everybody that what they are buying they look at with enormous respect and admiration, and the last thing they have any interest in doing is messing with a winning game,” he said on Thursday.

And:

For its part, AT&T has contended it would stay out of the way.

“I know they’re different cultures, and we’ll be protective of the cultures to ensure we don’t destroy the business,” Mr. Stephenson said at a conference conducted by The Wall Street Journal last week.

So yeah, it seems pretty clear what happened here! Exactly what AT&T said wouldn’t happen! But again, it’s not entirely clear why.

Recode’s Peter Kafka seems to get the closest to the matter, noting that AT&T clearly aims to mush all their new content together into one or more packages. Not stated, but pretty clear: this is to better compete with Netflix (and Amazon, and soon Disney, etc). That’s why that townhall last year was so instructive: Stankey was pushing hard for more content, more hours, more.

Yet HBO was not built to scale. It has been the epitome of quality over quantity over the years. Undoubtedly, Plepler could have squeezed more blood out of the dragonstone, but not as much as AT&T ultimately wanted. This is where the various Turner entities come in. Again: more.

This all seems fairly straightforward, except for how incredibly stupid it is.

This cramming together of content is going to fundamentally alter what HBO is, whether AT&T can see it or not. Plepler could clearly see it. And exits like his will only hasten such change. HBO is a brand that derives its value from its discernment and taste. Like Apple, it’s what HBO says “no” to that defines it.¹ AT&T is taking this “crown jewel” and shoving it on to a happy meal crown.

In the more direct tech world, we often watch big companies acquire and ultimately fuck up little ones. When this happens, the song is almost always the same: there’s some promise of autonomy that is then revoked.

The most recent, high-profile examples involve Facebook. Both WhatsApp and Instagram were sold on the promise of autonomy, quite literally. And for years, that’s what both got. And everything seemed to be going swimmingly. Then, for whatever reason, things changed. Then the founders bailed. And now the decay has started to set in…

Incidentally, Facebook was once considered to be one of the — if not the² — best of the big tech acquirers specifically because they were able to nourish and super-charge companies like WhatsApp and Instagram. And while we’re on the outside, it’s hard to see this success not being directly related to the level of autonomy bestowed on those companies. The marching orders were refreshingly simple: just keep doing what you were doing. If you need some help, be it money or talent or anything else, just ask. We’ll be back here if you need us, should you need us.³

And yet, given a long enough time horizon, everyone eventually meddles. There are different pressures, usually related to the bottom line. We can all look at this as foolish, but there’s clearly something we can’t see which causes these companies to do this. Or perhaps there’s something they can’t see, being too far in the forest. Who knows.

All I know is that AT&T should have been able to see this situation as a bad one. Because, again, they were saying all the right things over the past couple of years before the deal was actually finalized. But when it came down to it, they just couldn’t help but meddle. And now Plepler is gone. And other people will follow. And HBO will change over time as a result. And those changes will undoubtedly be for the worse. And we’ll all be worse off as a result.

² Amazon should probably get more credit in this regard as well. Over the years, they’ve brought in companies ranging from IMDb to Audible to Twitch and have had success letting all of them run largely as they were. You may say Whole Foods is a counter-example, but that company was having issues before the sale, it’s still too early to tell how successful of a deal it will ultimately be.

³ Google and YouTube is probably the prime example of “should you need us” with regard to money and talent — not to mention legal help!