💰 HBO'S NAME DROP

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HBO Max dropped the HBO from their name, sparking derision. The full picture is more complicated

HBO MAX IS dropping the HBO from their name, and people on LinkedIn are throwing shade. (Even Prof G!)

People are clowning parent company Warner Bros. Discovery for burning the valuable and prestigious HBO brand. Before we unpack this, let’s address the elephant in the room:

STREAMING IS A horrible business.

Especially in the TikTok/YouTube era. Top shows cost more to make than ever (see Kendall Roy’s penthouse, above), and at the same time it’s too easy for subscribers to cancel once they’ve binged the new season of whatever they’re into.

But it wasn’t always so.

FOR MOST OF its history, Netflix has been an absurdly disruptive innovator… and shareholders were here for it.

It's still kind of surreal to recall that the company started out by mailing DVDs to subscribers, no more than three at a time. (🙋‍♂️ Raise your hand if you remember those square red envelopes!)

Netflix’s team basically invented an entire sector of the media business, and turned a company that Blockbuster rejected buying for US$50m back in 2000 into one worth US$150b today. (For the record, that’s 3000x.)

Along the way, Netflix created not only an entirely new content distribution model, but they also pioneered new production methodologies, like simultaneously shooting shows in multiple languages. (While also pushing television production budgets way, way up in the process.)

PLENTY OF SHAREHOLDERS got rich off of Netflix's innovations.

I’ve previously written about how $NFLX stock went up by some *checks notes again* 11,000% from early 2009 to its high in late 2021. That’s completely insane. But those days are long gone.

A growing pool of competitors —not just newer entrants like Apple TV+, Peacock, Paramount+, Disney+, and HBO Max, but also other video-first platforms like TikTok and YouTube— are all siphoning eyeballs away from Netflix.

AND YOUTUBE AND TikTok have an unfair advantage.

Those two are are ridiculously profitable for the same reason they’re ridiculously popular: they get their content for free—and so does the end user.

As amateur content gets more watchable, it’s getting harder and harder for HBO Max, Netflix, and other professional streamers to compete for viewing time. Meanwhile, House of The Dragon and Succession, two popular HBO shows, each cost hundreds of millions of dollars per season to produce.

ENTER DISCOVERY+.

Their most popular shows include fare like Ghost Adventures, 90 Day Fiancé, and House Hunters. Guess what? Those cost a lot less to produce or license than The Last of Us and the other grown up, dramatic, high brow shows HBO is known for.

Goodbye HBO Max. Hello Max.

LIKE A LOT of people, I really like HBO and its shows.

That doesn’t matter. The decision to combine HBO’s high brow, high production cost programming with Discovery’s mass appeal, lower production cost programming makes logical sense as the service positions itself to not only compete with Netflix and Disney’s incredibly wide range of content, but with, like, the totality of human knowledge and creative output that’s available in the palms of all of our hands today.

(And, for the record, Warner Bros. Discovery is not ending the HBO brand. They’re simply not naming their whole streaming service after that one channel, a decision that reflects the fact that HBO isn’t everyone’s cup of tea, and never has been.)

BOTTOM LINE: WHEN it comes to the digital media business, prestige for the sake of it is definitely out.

What’s in? Making money. The future of streaming calls for less ego. And more free cash flow.

More:

Warner Bros. Discovery has renamed its flagship streaming service Max, eliminating HBO from the name »»

Written by Jon Kallus. Any feedback? Simply reply.