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HBO is getting a bigger budget under AT&T to challenge Netflix

HBO is getting a bigger budget under AT&T to challenge Netflix
Evan Rachel Wood and James Marsden in the HBO series "Westworld." (John P. Johnson / HBO)

HBO’s new owner is looking to devote more money to the network behind “Game of Thrones” and “Westworld.”

John Stankey, the incoming head of AT&T Inc.’s entertainment division, plans to boost HBO’s original-programming budget to keep pace with deep-pocketed rivals such as Netflix Inc.

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AT&T took over HBO and the rest of Time Warner Inc. on Thursday after overcoming an antitrust battle.

“I fully expect we’re going to be investing heavier in content development at HBO,” Stankey said.

Stankey, a phone-company veteran, will have to convince Hollywood that he can oversee a massive entertainment business. He’s taking charge of Time Warner’s three units: HBO; Turner Broadcasting, home of CNN, TNT and TBS; and the Warner Bros. studio. That puts him front and center in trying to marry a film-and-TV culture to a telecom business that dates back to Alexander Graham Bell.

At HBO, Stankey plans to have a bigger programming library and more on-demand content. He added that he wants to bring the online-only version of HBO to additional countries, giving cord cutters around the world a way to watch the network.

“Clearly there’s an opportunity internationally, where HBO could choose to have more direct relationships with end users than what they have today,” he said.

Even if HBO steps up spending, its budget probably will remain a shadow of Netflix’s. HBO’s overall programming budget, including original series and film deals, was around $2.5 billion in 2017. Netflix plans to spend $8 billion on programming this year.

AT&T prevailed this week in its grueling fight with the Justice Department, clearing the way for its purchase of Time Warner, a transaction originally announced in 2016. Time Warner will become AT&T’s media division, which will be based in New York and Los Angeles. The Time Warner name will be retired.

Time Warner Chief Executive Jeff Bewkes plans to stick around during a transition period, but Stankey declined to comment on the futures of Time Warner’s three division heads: Richard Plepler at HBO, Kevin Tsujihara at Warner Bros. and John Martin at Turner. It’s been speculated that Martin would leave the company after the deal closed.

Besides HBO, one of Time Warner’s most prized assets is its sports programming. Stankey said he sees new opportunities to use Turner’s NBA broadcasts for AT&T’s phone subscribers because the games are shorter than in other sports.

“It’s a format that’s well-tuned to a distracted society,” he said. “The highlights can be compressed in better ways to get engagement.”

But he said AT&T would be cautious about future sports rights and would not go “willy-nilly and look at all sports content.” He said he preferred investing in programming that AT&T can own, not license, so it has the flexibility to show it on different platforms and markets.

“If we can manage those rights more effectively we can have better products,” he said. “Licensing sports content is more cumbersome. There’s a balance that needs to be struck.”

In the next few days, AT&T will launch a new low-cost TV service with Time Warner programming as the anchor. It will be tailored to people not interested in sports, Stankey said.

CNN, meanwhile, will start using AT&T’s wireless data to tailor news programming to phone customers, “based on where they are, what they’re doing, what their likes and dislikes are,” he said.

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While waiting for the deal to close, Stankey has been acclimating himself to Hollywood by adding more shows and movies to his steady diet of sports viewing, he said.

In recent days, he has watched the first two episodes of HBO’s “Succession” and says that, besides golf, his Sunday appointment viewing is HBO’s sci-fi show “Westworld.”

“I’m kind of hooked on it now,” he said.

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