What Streams May Come: The Story of HBO

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S1: Carolyn Strauss began working at HBO in 1986.

S2: It’s that torrid tale of a temp who looked around, realized this is not a bad place to work. People are smart stuff was interesting and began a thirty four year plus association.

S1: When Carolyn started at HBO, it already revolutionized television twice, first it pioneered the idea of TV that you pay for, and then it became the first channel to broadcast by satellite across the country. But back then, HBO wasn’t yet known for being the home of so-called prestige TV.

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S2: At the time, the drivers of HBO, the things that people really signed up for, were boxing and movies and the other stuff, original programming took up a much smaller portion of the budget and of the schedule.

S1: Carolyn was one of the people who radically changed that over a couple of decades. She rose from Tampa all the way to president of HBO’s Entertainment Division and along the way helped bring to life acclaimed HBO shows like The Sopranos, The Wire and Six Feet Under. Which was secretly like your favorite,

S2: don’t make me choose amongst my children, I love them all

S1: these days. Caroline no longer works at HBO, but she still produces content for the network. She says the company faces a lot more competition than it did during its heyday and it has a much tougher time standing out.

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S2: I find it really difficult to keep straight where I watch something. And I think, you know, I’m like, was that a cooler show? Is that a Netflix show? I don’t know how you avoid it, really.

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S1: It makes me think of this that it’s not TV, it’s HBO slogan. And that really felt true, like there was TV and then there was HBO and nobody else was doing what HBO was doing. I don’t know if that slogan you can still really say that.

S2: Yeah, it’s not streaming. It’s HBO, except it’s streaming.

S1: HBO is now fully engaged in the streaming wars with its Internet based HBO IMAX service vying for subscribers against formidable rivals Netflix, Hulu, Amazon Prime Video, Disney Plus, Paramount Plus, Apple TV Plus. Probably some other pluses, too. Meanwhile, HBO corporate identity is getting yanked around. It was bought by AT&T, then spun off by AT&T and is about to be merged with Discovery all in the last few years. With leadership changes right and left and its mission still not totally clear. Is HBO due for more bundling or unbundling or maybe re bundling amid all this turmoil? Can the pioneer of prestige television managed to stay prestigious?

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S3: I’m Seth Stevenson.

S1: Welcome to Thrilling Tales of Modern Capitalism. Today on the show, What Dreams May Come the story of HBO.

S4: It’s so hard for people who have grown up in the last 30 years to imagine what it was like, there’s just three networks.

S1: Bill Mashi worked in corporate communications for HBO from the early 80s until the late aughts, and he wrote a book about the history of the company, he says, to understand what made HBO so new when it launched in 1972. You first need to understand the television landscape that it would eventually crack apart a long time ago in an entertainment galaxy far away. There were three big TV networks that broadcast their signals out into the sky. Anyone could grab those signals for free using a simple antenna. This technology created the network’s business model. They couldn’t limit who grabbed their signal, so they made a virtue of it. They sold ads. The more people who grabbed the free signals, the better, because that meant more eyeballs for the advertisers. It all worked great, except for the people who wanted to watch TV. I lived in places where antennas didn’t work. Starting in the 1940s, services sprouted up to bring TV to these folks using cables that ran directly into their living rooms. Typically, these customers needed so-called cable television because they lived, say, behind a big mountain range that blocks the network signals. But in the 1960s, a guy named Charles Dolan started wiring a cable system for a different kind of topography.

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S4: Golan had been trying to sell cable in Manhattan because of the high buildings. Depending on where you live lived in Manhattan, you could have more trouble getting a clear picture than somebody living out in Connecticut. So Dolan saw this as a market for cable. But running cable in a city like New York is tremendously expensive and physically difficult. And he realized that he needed something else to drive that business other than the fact that I can get you a clear picture of Gilligan’s Island.

S1: No one is excited to pay for something other people are getting for free, so Dolan’s idea was to create a special ad on Channel One that would only be available through his cables. And since this channel wouldn’t be floating out in the sky for anyone to grab for free, it could use a different business model. It didn’t need to be supported by ads. You could charge a monthly subscription originally codenamed the Green Channel. It eventually got Christens Home Box Office on a November evening in 1972. It went live for the enjoyment of a grand total of 365 subscribers. HBO showed a New York Rangers hockey game, followed by the movie Sometimes A Great Notion, starring Paul Newman.

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S2: Hank, I thought all your dinosaurs were dead. They want this and they’re going to have to shoot them, right? You got to knock them down.

S1: Charles Dolan would go on to make a ton of money laying cable all over suburban Long Island once people started wanting cable TV, even if their antennas worked, his new company, Cablevision, got rich enough to buy, among other things, the Rangers, the Knicks and Madison Square Garden. But Dolan spun off HBO in 1973 to one of his investors, Time Inc, the magazine company, which had decided that cable TV was the future and that time would be wise to diversify by getting an early stake in it. Within three years, time upped HBO subscriber base to 100000 homes across parts of the Northeast. It attracted customers mostly by running recent Hollywood movies, uninterrupted by ads and untouched by censors, something TV networks couldn’t offer both because of their ad supported business model and because of FCC decency regulations that govern the free airwaves.

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S4: Adult movies could stay adult. And when I say dull, I’m not talking about nudie flicks. I’m talking about if you have nice, pungent R rated programming, it can be presented unadulterated. And in the beginning that was novel enough. The fact that you were getting movies uninterrupted in your house for its time was revolutionary.

S1: HBO stayed regional for its first few years, partly because of technological limitations. I’m going to get in the weeds for just a second on this, so bear with me. The Big Three networks were broadcasting their signals using high wattage towers operated by their affiliates around the country. This was an infrastructure heavy method. HBO had been relaying its signal via microwave transmissions to hubs around the northeast, from which the signal would get fed by cable into individual homes. But microwave transmission was short range, just line of sight. And it would have been very tough to expand across the country this way. HBO needed some other way to get its signal all over America to reach more potential customers and do it affordably.

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S4: So that’s when they looked into going to satellite. Now, this seems quaint, looking back on it, but that was considered a revolutionary thought because at that time, nobody, no TV programmer was carrying their signal full time by satellite.

S1: Bouncing a signal off a satellite orbiting in space had been almost exclusively used for breaking news reports from far off lands or for live broadcasts of major sporting events. No one was beaming regular TV shows by satellite around the country.

S4: All you have to do is lease one transponder on that thing and overnight your national. Now, nobody else had done that because nobody trusted it, we’re afraid of it, what happens if the satellite falls down? What happens if it fails? But we roll the dice on that. And overnight we were coast to coast. And that was the prototype everybody sees this is a cost efficient way to become a national broadcaster with out all the architecture that the broadcast networks have. You’re watching premium subscription television on box office.

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S1: HBO first transmitted by satellite in late 1975. And the move foreshadowed how TV would develop for the next few decades. People quickly saw that you could skip a lot of steps by using a satellite. So, for instance, a guy named Ted Turner takes a little Atlanta TV station called TB’s and beams it by satellite everywhere. And voila, it’s an instant Superstation available nationwide without any infrastructure buildout for HBO. Going to a national satellite feed resulted in explosive growth through the late 70s and into the 80s. TV watchers around the country wanted to throw money at HBO as soon as they could.

S3: There’s a weekend of great

S4: premiers coming your way on home box office, starting with July and John Saxenian, stranger in the house. It’s Christmas on campus. There were stories of people literally chasing the cable truck down the street. If somebody got hooked up or while you’re here. And it was growing literally from year to year by several million subscribers. And it looked like for the moment it would never end a weekend you won’t want to miss next Friday, Saturday and Sunday on Home Box Office.

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S1: HBO’s early competition was with a rival channel called Showtime, they mostly battled over, which would get the exclusive rights to air the hottest new movies. But in the 1980s, a new kind of competitor emerged. VCRs and VHS cassette rentals let people watch movies at home uncut and uncensored without subscribing to HBO or Showtime. This eliminated TV’s biggest selling point. HBO needed to find something new to lure in subscribers. And this is when it began to create more original TV programming. But what kind of shows would HBO make? It fell back on its central purpose to serve as an alternative.

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S4: Well, the whole idea is to do something that the networks are not doing. You’re more or less a counterpuncher

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S1: at first, HBO leaned into an obvious difference, the freedom to put nudity in sitcoms. In 1984, HBO debuted a show called First and then it was about a woman who owns a football team. Just a few questions. How did you end up with the team?

S5: Let’s just say it was a divorce present from my husband. Have you had any experience at all with football players? Well, I spent four years at the University of Alabama as a cheerleader. What do you think?

S4: I still remember a number of critics saying the most imaginative part of this show is how they get the cheerleaders in the shower.

S1: But over time, HBO discovered it could bear nudity and profanity with quality. And the result was something different from what the networks had and something people would willingly pay for.

S2: As our programming grew more successful and we realized that this was an area that we could compete in. We started to inch in a different direction.

S1: Carolyn Strauss rose through both ranks in the era when original programming was increasingly becoming its raison d’être. She says the ability to create TV that pushed new boundaries was directly related to HBO subscription based business model.

S2: Because we didn’t have advertisers, there was less restrictions on what people could say, and then that kind of gelled with allowing people who had had a lot of success in network television to do something different on HBO. And it wasn’t just the freedoms of sex and violence and whatever language, et cetera, but it was being able to have unlikable characters, have characters that have real points of view, have an anti-hero, be a leading man. Those weren’t really the staples of network television at the time. And so that was what we set out to do.

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S3: We’ll be right back with John Ritter and

S2: others, we have a great show, no flipping. We’ll be right

S1: after winning critical acclaim for The Larry Sanders Show in the early 1990s, a show that was a lacerating satire about television. HBO really became HBO with two shows it launched in the late 90s. First, in 1998, Sex and the City arrived with its frank take on female sexuality.

S5: I’m a transsexual. I’ll try anything

S1: once. Then in 1999, the big one, The Sopranos, with its unlikable antihero, mob boss, protagonist, there’s

S5: a Sunni sang for every 20 wrong’s. A child does ignore 19.

S4: There’s an old Italian saying, you fuck up once you lose two teeth.

S1: The hits kept coming after that with successes in the arts, ranging from a closely observed family drama like Six Feet Under to a bleak show about drug crime in Baltimore, like the wire all the way to a mega budget global fantasy sensation like Game of Thrones. Carolyn Strauss was involved in the decision to greenlight a lot of these shows. Some of them were no brainers. But she says that with many of them, it was a very different calculation than it would have been at a traditional network.

S2: I mean, a show like The Wire, we could never attract what I felt was the kind of audience it deserved, given the level of excellence I think that the show delivered on. But we kept doing it because we just thought it was great.

S1: HBO didn’t need lots of eyeballs on every show to please advertisers. Just one show you love might be enough to get you to sign up for HBO or to stick with it and keep paying every month. And a high quality show with low ratings might still be kept around if it created Buzz. The feeling that to be a truly plugged in TV watcher, you needed to have HBO.

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S2: And then we had to think of was this a press show? Because that was very important for HBO. I think as a smaller service, we need to make some noise and draw attention to us. And then later on, as we realized we could compete in an awards arena, would this be something that would be appealing to awards voters the Emmy goes to? But of course, Angels in America.

S1: HBO shows did appeal to awards voters and did get a lot of press all through the office of the same name, Angels in America has received 21 Emmy nominations, the most for any miniseries this year. Executive producer. But in 2010, HBO launched its first over the Internet app, HBO Go officially becoming a combatant in the streaming wars. And while before HBO had been a pioneer in pay TV and in satellite broadcasting, now it was stepping onto well-tried ground.

S2: I think it’s a much more difficult environment to do work because there’s so many streamers and services out there competing for eyeballs. You know, at the time when I was at HBO, I had it way easier than they do. I mean, we were just worried about it. Oh, my God, showtime. You know, and that feels like a very quaint time, a more gentle, gentle moment.

S1: Caroline is still a fan of HBO, even though she no longer works there, but in the streaming era, her loyalties as a TV viewer are divided. When I asked which shows she likes to watch these days, she named one that runs on Netflix.

S2: My favorite show right now is Schissel, and I think any network that can put on a family drama about a group of Sediq Jews in Jerusalem and have me glued to it, I got to give them props. I mean, look, I’ll always check out what HBO and I think have a lot of really great stuff on, but it’s hard to deny that Netflix has not made an enormous impact on the television landscape.

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S1: The competition is no doubt fierce, but the turmoil within its ownership structure isn’t making life any easier for HBO.

S6: There is a definite fear that HBO won’t have the same agent that it once had.

S1: More on that when we come back. OK, we’re going to get into the weeds again for a second, this time about who’s owned HBO. Here we go. HBO was run by timing for almost two decades, then Time merged with Warner Communications, famous for Warner Brothers movies in 1990 and became Time Warner. And then you might remember, Time Warner became AOL Time Warner in 2000, but that went south. It’s a whole other story. And by 2003, the company was sheepishly calling itself Time Warner again. In 2014, it spun off Time magazine but kept the Time Warner name in 2016. AT&T reached a deal to buy Time Warner and in twenty eighteen, after a lot of regulatory rigmarole complicated by then President Trump’s hatred for CNN, which was one of Time Warner’s marquee properties, that deal finally closed and AT&T renamed its new toy, Warner Media. So that’s the who, what and when. Now, let’s talk about the why. Why did AT&T want to own Time Warner and by extension, own HBO?

S6: Look, no one really knows the answer to this question that it’s five years later.

S1: Alex Sherman is a CNBC reporter who covers the media business. He says the rationale for AT&T buying Time Warner, which includes properties like Warner Movies, CNN, TBS and of course, HBO, was always a little murky. AT&T executives made vague claims that synergies would result if they combined AT&T cell phone business. With all those entertainment assets, there was some precedent for bundling entertainment with other services. So the company thought maybe you’d choose AT&T over Verizon or T-Mobile if free HBO came with your AT&T cell phone plan.

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S6: That theory did not pan out. There were very few synergies that made owning Warner Media beneficial for AT&T. Several people said this at the time of the transaction. This was not necessarily a surprise.

S1: It turned out you don’t need to own the entertainment to offer a discount on it. Verizon offers discount to Disney plus with its cell phone plans, but it didn’t need to buy Disney to do that. The upshot of all this was that after having swallowed Warner Media Whole only a few years ago, AT&T regurgitated Warner Media just about a month ago in what seems like a clear admission of defeat.

S6: They lost tens of billions of dollars on this deal. This was not a good deal for AT&T shareholders. What happened is that AT&T decided they were throwing in the towel on the media business.

S1: AT&T made a big fuss in twenty twenty when it launched HBO Max the HBO Internet streaming service. But it takes a lot of money to make content that people want to stream. And AT&T is facing some costly infrastructure investments to get its cell phone service up to speed in the five gera. So the company decided to refocus on cell phones and stop throwing money into the streaming mall. Its queering HBO off its books. And now HBO and the rest of Warner media are merging with Discovery, which, in addition to the Discovery Channel, owns things like HDTV, the Food Network and Animal Planet. Presumably, this agglomeration of wildly varied content will form the basis for a new streaming service to compete with other streaming services like Netflix and Hulu.

S6: The question is, how much money are Americans willing to pay for streaming services before they tap out?

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S1: If you’re already spending 14 bucks a month for Netflix and eight bucks a month for Disney, plus at a certain point you might find it hard to justify the 15 bucks a month for HBO Macs, but maybe it will look more attractive if thrown into the bargain. You get discovery stuff like animal shows and property brothers. That could be a more tempting offer. But what does that mean for HBO, creator of The Sopranos and The Wire, home of Prestige TV? HBO Max was launched on the strength of this carefully built HBO brand. Is this going to dilute the brand and cheapen it in some way?

S6: No one knows the answer to that. This was the fear of many people that worked at HBO previously that if you take HBO and you offer a bunch of programming, that’s very much not HBO. And Discovery is on the other end of HBO, 90 day fans say, you know, HDTV, cooking channel reality shows this is as far away from HBO as you get. Suddenly over time, you now have a product that will degrade the HBO brand and people will lose the connection of Prestige and HBO because it’s just kind of this mish mash thing.

S1: His most recent hit Mayor of his town, starring Kate Winslet, shows the network still make stuff that people want to watch but cannot keep pace with well-funded competitors who are churning out quality shows at a dizzying rate. As HBO’s new Alliance with Discovery launches, it’s already at a massive disadvantage compared to its rivals HBO. Max has about 45 million monthly subscribers, but Disney plus has more than 100 million and Netflix has 200 million. Adding Discovery’s 15 million subscribers helps but to get the kind of scale they’ll need, HBO and Discovery might need to add some more partners into their mix, which seems weird since everything we heard about streaming was that it would be great because it was unbundling your cable package so you could pay for channels a la carte instead of paying for 150 channels and only watching six of them. But now we’re talking about rebundle in content so you can pay for a package of channels just like before. Yes, those channels come in new combinations and over the Internet instead of through your cable box. But it seems like in a lot of ways we’re back where we started. Are we first to go back and forth between bundling and unbundling and bundling forever?

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S6: We are headed to a great rebundle. And that’s why I think there’s a decent chance that we’re not done with the consolidation here, that either one of the big behemoths, Apple, Amazon. Disney maybe comes along and buys the combined Warner Media Discovery Company in several years or Warner Media Discovery decides they still don’t have enough content and they end up buying or merging with either NBC Universal or Viacom CBS.

S1: A little more than a week after HBO and Warner Media joined forces with Discovery, Amazon bought MGM, the Hollywood studio behind, among other things, the James Bond franchise. Presumably it did it to shore up the Amazon Prime video streaming library and throw yet more content onto the already raging fire for HBO. This must be a scary new reality. They’re not competing against Showtime or VCRs. They’re competing against Amazon. Apple, the biggest, richest companies in the world, and they’re not pioneering new ways to watch TV. They’re scrambling to catch up with places like Netflix that have been doing this much longer and at a scale that would have been unimaginable at the height of HBO’s vaunted successes. Everything about TV is up in the air these days. And for Carolyn Strauss, who started as an HBO temp way back in 1986, in a much simpler time, it’s not at all clear whether this crowded new television landscape is an improvement.

S2: You know, right now I’m so overwhelmed by television, I am overwhelmed by choices. Honestly, I don’t know whether it’s better for me to be bundled or I’m just overwhelmed and confused by the whole thing.

S1: That’s our show for today. Next week. What happens when big tech tries to take over groceries, wire scale and efficiency becoming more

S4: important because of Amazon?

S1: That’s next week on Thrilling Tales of Modern Capitalism. This week’s episode was produced by Jess Miller and Cleo Levin Technical Direction from Merrett, Jacob and Kevin Bendis, editing from Jonathan Fisher. Gabriel Roth is Slate’s editorial director for audio. Alicia Montgomery is the executive producer of podcasts at Slate. June Thomas is senior managing producer of the Slate podcast network. Ilesha Soldier is managing producer. I’m Seth Stevenson. See you next week.