EXCLUSIVE: Even in a business well-acquainted with comebacks, HBO Max has become a fairly remarkable turnaround story.
While still a work in progress, the streaming service has recovered from an inauspicious launch last May to find itself a central part of the overall streaming conversation. Combined with linear HBO, HBO Max added 2.7 million subscribers in the quarter ending March 31, reaching 44.2 million. That is substantially ahead of targets initially set out by its corporate parents, WarnerMedia and AT&T. (Customers already paying for HBO through their pay-TV provider can access the $15-a-month HBO Max at no extra charge.) In June, an ad-supported tier will be introduced, reportedly for $10 a month. HBO Max will also launch in June outside the U.S., another way it hopes to hit its goal of 120 million to 150 million global subscribers by the end of 2025.
The gains in the most recent quarter came as a bold experiment was playing out on the platform. WarnerMedia, citing Covid-19 limitations on exhibitors, put the entire 2021 Warner Bros slate on HBO Max for month-long runs coinciding with their theatrical release. The slate move, which followed a test with Wonder Woman 1984 last Christmas, prompted a fierce backlash. Director Christopher Nolan, whose seven films for Warner Bros included last year’s Tenet, bluntly labeled HBO Max “the worst streaming service.” CAA’s Richard Lovett called the decision a violation of “trust and boundary” in a letter to WarnerMedia CEO Jason Kilar. Dozens of financial stakeholders had to be compensated under the financial assumption that their movies would all be hits.
Defying the Hollywood consensus, several Warner releases have prospered at the U.S. box office even though they were also available to stream for free by subscribers. Mortal Kombat in April opened to $23.3 million, on the heels of a $48.1 million five-day launch for Godzilla vs. Kong. Covid-19 initially hamstrung HBO Max when it debuted in May 2020, as did confusion in the marketplace about who can get it and how. But now, under a restructured management plan implemented by Kilar, the fresh theatrical titles following a couple of buzzy fall series have finally given HBO Max traction. Breakthrough distribution deals with Amazon and Roku late in 2020 also added momentum. While comparisons are inexact, given that it started with a large base of existing customers, the service has turned into a more legitimate revival to Disney+ and Netflix.
Andy Forssell, a onetime colleague of Kilar’s at Hulu, was COO of AT&T-owned Fullscreen and Otter Media before becoming WarnerMedia’s EVP & GM for Direct-to-Consumer in 2019. As a principal overseer of HBO Max, he spoke with Deadline about the takeaways from a whirlwind Year 1; the future of theatrical windows; the addition of an AVOD tier; live sports; and global expansion. The interview has been edited and condensed for clarity.
DEADLINE: Now that you have a few months of results, what are you seeing in on HBO Max once viewers come in for a movie like Godzilla or Mortal Kombat?
ANDY FORSSELL: The biggest call-out for us has been how strong retention has been. We had pretty aggressive projections and it’s been even stronger. We brought millions of people in for Wonder Woman, we could watch them roll through The Flight Attendant afterwards. All eight episodes of The Flight Attendant were in the top 10 assets for three weeks in a row. I expected a little bit of a drop off in January because you bring a lot of people in, you’re going to have some churn, it’s normal. I thought we’d start to bounce back in February and March. But January turned out to be a bigger month than December.
We don’t report retention externally, so I don’t have a good way to quantify it for you, other than to say that mathematically retention’s a huge lever, right? If they don’t go out, you don’t have to go get 10 of them to come back in. Mare of Easttown just went up 25% from first ep to second ep [across linear HBO and HBO Max]. That’s because of the waves of people that have come in, not entirely for the films but many of them driven by the films. I’m sure many of those people planned to leave. I had friends who said, ‘Oh, yeah, we’ll come watch Wonder Woman and then we’re going to leave,’ and they didn’t leave. I like the interplay between film and TV. It’s really nice to see people go back and forth between those.
DEADLINE: Things have been much smoother lately, but it was pretty bumpy in 2020. There were major management changes and distribution snags and, because of Covid, you didn’t have the shows you planned for your launch. We’ll talk about the Warner Bros slate in a minute, but apart from content are there ways that HBO Max has evolved as a service over the past year that helped it get traction?
FORSSELL: I’d call out two things. Not just the product, but also our engagement marketing. The phrase I use all the time is, ‘Can we get to the right person with the right show or movie at the right time on the right device?’ It’s a little like matchmaking. There’s a little bit of magic in that, like if you can get someone to recognize, ‘Oh, yeah, this is for me,’ that’s great. As consumers, we all look for that.
We launched the product last year without significant personalization. It was the platform that had HBO Go and HBO Now, with a bunch of improvements. [Ed. note: HBO Go, an authenticated app for HBO subscribers, was phased out and HBO Now, a stand-alone streaming version of HBO that launched in 2015, was rebranded as HBO.] We have improvements sketched out literally for the next two years. It’s at least a build every month. Last September, October, November, that really started to pick up, and I won’t call out specific things because a lot of them are small. But they add up to significantly more personalization and better use of data across the board.
We’re exposing 85% to 90% of our entire catalog in any given week. We weren’t doing that last summer, so we’ve gotten a lot better at using purposely limited screen space. We don’t do an infinite scroll like some other services do. You’re getting 17, 18 or 19 rows — which sounds like a lot, but you hit a bottom, right? And that’s very useful. How do we use those as best we can to catch someone’s eye and get them to say, ‘Oh, I’m interested in that, let me play the trailer.’ I think we’ve gotten much better at that matchmaking.
DEADLINE: Was there stuff that you had to fix? Were there things that were just not quite in place that you have added?
FORSSELL: It was a really good, solid platform that could handle a pretty limited catalog. It was certainly playing a quality game, not quantity game. It did it elegantly and it didn’t fall over if 5 million people got on Sunday night to watch Game of Thrones. That was their focus, to not fall over when millions of people get on at the same second.
When we launched HBO Max, we had to be ready to evolve that platform, add a lot more content, which means capabilities like the ones I just mentioned. You have to get a lot more sophisticated, or else all that content is just going to remain hidden, right? Of course, someone could search, but they don’t know what to search for. You get a lot better in a data-driven way. We expanded the editorial team and looked more closely at the interesting mix of duration of viewing and data and how do we make those work together. We had to invest a lot. The department doesn’t look like it did before at all. Under the hood, a lot of [the technology backbone] shares common ground with what was there before.
Despite no Game of Thrones, we now have concurrent numbers that dwarf those regularly. I’m excited to see what happens when the new Game of Thrones prequel comes out next year, but we really had to rework the platform and we had to make it work on more devices. Plus, now we’re going to do ad-supported, that’s a whole other layer of investment to make it handle elegantly as supported formats on all those devices.
DEADLINE: You’re going to announce details about your ad-supported tier later this month. How have you tackled it operationally? Is a team within your overall group focused solely on AVOD?
FORSSELL: The Turner ad operation is a multibillion-dollar business, much of it linear but a good part of it digital. So, first of all, we start with incredible sales capability and also some really good operational capability. In terms of our tech team, there is a separate tech team that we had to build from nothing that handled the ad serving and takes all those outputs from what was the former Turner groups that managed all that and elegantly knit it into our existing product.
The development team was also doing a bunch of work because we’re launching in Latin America. So, they’re having to build a bunch of capabilities due to multi-language and multi-currency and a lot more.
The biggest thing is there are completely new teams to kind of do this type of advertising at a high level where all the content that comes into the platform now has to have ad breaks. We didn’t need ad breaks before. [Ed. note: HBO programming will not carry advertising.] That’s a simple thing to say, but actually takes a lot of sophistication to do efficiently. You can throw humans at it and spend a lot of money but we’re trying to use technology smartly, so we’ve had to build all that capability.
And then you know, there’s a bunch of operational and technical things you have to build and policy on top of it to say, ‘How many times should we show a given user a single ad?’ That seems like a basic question but it actually sets up a really good debate internally and our answer is going to be much fewer times than many other people have decided. That means you have to turn away revenue and say, ‘We’re going to have a really premium user experience here, which means you’re not going to see ads multiple times. You might see it twice in a week.’ So, we’ve had to develop all that. It’s not rocket science but it’s got to be really thought through, especially in terms of how we look and feel different than other providers.
DEADLINE: Let’s turn to sports. Turner landed a seven-year deal for NHL rights, and HBO Max is one of the platforms carrying games. But your colleague, [WarnerMedia news and sports chief] Jeff Zucker says HBO Max won’t stream games the first season and will phase them in over time. For two years now, both WarnerMedia and AT&T have mentioned plans to add live sports to streaming, as is happening across the industry. What’s your outlook on when that will happen?
FORSSELL: I think people experimented with live streaming, but for the most part with long-form entertainment users have spoken. You’d rather have it on demand, and there’s not a big need for live or synchronizing with other people. Sports is different. Sports is live because you don’t want spoilers, you want to find out what’s happening in real time. We will absolutely lean into sports, as Jeff made clear. Nothing this year on hockey, but that’s a seven-year deal. It would be crazy if hockey didn’t end up on HBO Max, he made clear, for a bunch of reasons. Not in ’21 — that deal came together quickly. We will figure it out. You’ll probably see us experiment with live sports in other regions before the U.S., but the hockey rights obviously give us something to think about.
I’m interested in why you’re interested. I mean, there’s an obvious live aspect to sports, but does it seem like an odd addition to SVOD to you?
DEADLINE: In your case, arguably yes, given how few shows on HBO are live. When you count TNT and TBS in linear, of course there’s the NBA and college basketball and everything else, but that’s not part of HBO Max. It just seems like it could be challenging to communicate it to the same customers looking for on-demand movies and series. Anytime [Netflix Co-CEO] Ted Sarandos is asked about doing live news or sports, he says they don’t need it.
FORSSELL: He would, if they got some sports rights.
FORSSELL: But I think what you’re calling out is real and notable. I do think it’s all about how you bring it to life in the user interface. I don’t think people want to click in and suddenly see something just playing. It would seem to be, I think, out of context for what any of these services are. That said, just to be able to click and see something that says, ‘Hey, now playing’ with maybe a frame there. I think people have adapted to that. The virtual MVPD bundles, like Hulu and YouTube TV, have primed that a little bit. People use them mostly for VOD, but there’s always the option to click into something live.
DEADLINE: It’s been about six months since the Warner Bros decision, which was a huge controversy at the time. How would you characterize WarnerMedia’s relationship with the creative community today? It seems like it has required a lot of resolve, financial reserves and patience to be able to stay the course and show that you weren’t actually trying to torpedo the movie business. Do you think you’ve changed a few minds? Or is the jury still out?
FORSSELL: [Warner Bros execs] Ann Sarnoff, Toby Emmerich and Carolyn Blackwood, they have the authoritative answers to that, because they live it. I’ll answer, but let me answer with a slight remove because they’ve had to live in the center of it.
First of all, I do think it’s become a little clearer to objective observers now that we’re one of the main sources of movies in theaters right now. We’re never going to get that great thanks from theater owners because they’re too busy trying to run businesses in tough conditions, so we don’t expect that. Remember, we said in December — I think it was easy for people to think maybe it was disingenuous — but part of what we were thinking about was the health of the theater business. Beyond Mortal Kombat and Godzilla vs. Kong, we have high hopes for some of the upcoming titles. Both those did phenomenally well on HBO Max, so we’re in the middle of this crazy year, I think it was the right thing to do, and we have conviction about that.
People kind of fear change, but really what that means is they were worried that it was going to cost them money. In a pandemic year, there was a danger of everybody taking a hit financially. I think many of our creators are in a place where they’re like, ‘No, we got to a good deal.’ It was a jarring set of conversations, but we got to a good deal, and I think it’s playing out as well as it could.
Next year, we’re sort of back to experimentation. You’re going to see the whole industry do it. I think you’ll see windowing of movies all over the place. That’s hopefully a good thing because consumers are going to get to vote. They’re going decide and you’ll see us experimenting along with everybody else.
DEADLINE: Expanding internationally is a major initiative. What have you learned so far as you to try to make the service work globally?
FORSSELL: We’ve had to tackle some basic questions about, whether the brand should be talked about identically in different regions. My instinct is to blurt out, ‘Yes, it has to be, we want to be a global brand.’ But then immediately you have to realize that you will have some different content mixes. And look, the base for content will be very similar, we’re going to flow content from the U.S., obviously given the quality and amount that we produce. But it’s going to flow the other direction as well, and the emphasis on some of that regionally produced content will be much heavier, obviously, and it can change the flavor.
So, when we launch in LatAm, you’ll see some subtly different branding, and we realize that region has to have the ability to go off and talk about themselves differently. We do want a global brand, we’re dead set on that but it’s going to have some regional differences. But they’re not dramatic. We’re a general entertainment service anchored with HBO and DC and great Warner Bros stuff, and then augmented with themes from the region that will flow back to the U.S. So, there is a globalization going on that makes it a little easier to think about this as a global service with regional variations.
DEADLINE: Speaking of branding, I’m interested in the way you are presenting HBO shows. For example, you’ve got Succession coming back toward the end of this year. Will there be messages to watch it on regular HBO or is it just going to be positioned as an HBO Max title? That seems to be the direction you’re going.
FORSSELL: There are 85 million homes in the U.S. that are still subscribing to some form of a cable bundle. And we all know that number is going to go down, not up, but that’s still a heck of a lot of homes for people that are purposely choosing that that is some significant part of how they want to watch entertainment. Succession you’ll see advertised as an HBO show, so obviously you can watch it on HBO if you get that through cable. But generally the end card is going to say, ‘See it on HBO Max.’
That’s not because we don’t need you to watch it on HBO, it’s because HBO already got mentioned up front and those viewers know where to get it. It’s the new people who need to know ‘Go here.’ Interestingly, the pandemic, as it did in so many ways, accelerated change. I think there are a lot of people, probably a little older, who said, ‘It’s time for me to finally figure this out, get my set of my apps that I’m into.’ It doesn’t mean they stopped watching on linear, but I think you’re seeing a lot more people — and we’ve seen it in our numbers — realizing that consuming through an app is probably more the future.