The head of HBO Max on launching without Roku, adding 4K HDR, and the Snyder Cut

Verge editor-in-chief Nilay Patel and Verge reporter Julia Alexander talk to Otter Media CEO Tony Goncalves on his new project overseeing HBO Max. Goncalves discusses AT&T's strategy for the WarnerMedia streaming service, the dispute with getting the app on Roku and Amazon, HBO Max's place in the streaming wars, and how their data usage works on mobile. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Speaker 00

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• 0:58Nilay Patel?

  Hey, everybody. It's Stephen from The Vergecast. Big interview show this week. Julia Alexander and I sat down with Tony Gonsalves. He's the executive at AT&T responsible for HBO Max, the company's new streaming service. Tony's actual title is CEO of Otter Media, which is the division of AT&T that's doing HBO. It's a complicated org chart. We made Tony explain it to us. We talked to Tony the day after HBO Max actually launched, so we heard about how the launch went, how it's going. We got deep into the strategy for HBO Max, how it's rolling out, the dispute with Roku and Amazon HBO Max isn't on those platforms yet, and broadly, the future of the streaming wars. It turns out Tony doesn't like the term "streaming wars" at all. You'll hear about it. Here's one thing I want to call out.

• 1:40Nilay Patel?

  I asked Tony point blank whether AT&T would excuse HBO Max from its data caps or give it priority access to its network over Netflix and other services. You'll hear it. Tony said they've had the conversations about it, but he didn't know the answer. As it happens, I later talked to an AT&T executive familiar with the situation, who told me that HBO Max is indeed excused from AT&T's data caps. So if you pay for a plan that has 10 gigs a month of data, Netflix will use that data, but HBO Max will not. And if you have an AT&T Unlimited plan... And you probably know that there's a cap on the amount of data you can use before your speeds are throttled. Well, HBO Max won't count against that either. According to the executive I talked to, all this is accounted for as something AT&T calls sponsored data, which theoretically allows any company to excuse itself from the

• 2:25Nilay Patel?

  data caps. The difference here, of course, is that AT&T owns HBO Max. So it's essentially paying itself. It's just moving money from one part of AT&T to another. If Netflix or Hulu wanted to be excused from the data caps, well, they'd have to pay AT&T real money. It's pretty tricky. So that's that complexity explained. All in all, there's a lot going on in this interview. Everything from marketing strategy to whether or not there's going to be ad-supported version to the Snyder Cut. And data cap question aside, Tony wasn't afraid to go deep on how he and AT&T are thinking about HBO Max. Check it out. Tony Goncalves, CEO of Otter Media.

• 3:04Nilay Patel?

  Tony Goncalves, you're the CEO of Otter Media at AT&T, which importantly means you're in charge of HBO Max. Welcome to the Vergecast.

• 3:11Speaker 05

  Thanks for having me. Awesome day.

• 3:13Nilay Patel?

  Yeah, HBO Max launched yesterday. Can I quickly just ask you, are you going to change your title to CEO of HBO Max? It feels like that you should be out there being like, I'm the HBO Max. Like when we were doing this, I was like Otter Media, like it was a thing, but HBO Max is like the thing now. Are you thinking about changing it?

• 3:29Speaker 05

  Well, look, Otter Media is still a thing and it's a, it's a digital-first, fan-centric media company and that's essentially what HBO Max is, you know, it's, it's, it's leaning digital for a company like Warner Media and it's about serving fans. But I spend very, very little time thinking about my title. I just like being close to the metal team that makes, you know, makes, makes great stories, builds great products and puts them out in the marketplace. You can call me janitor for all, for all I care.

• 3:57Nilay Patel?

  Look, we've got a title, the podcast episode, something. So if that's what you want, we'll go with it. But actually, give people your backstory. Before we started just a minute ago, I was joking with you. Like, you haven't done a lot of podcasts or videos or stuff like that. Give people just your backstory to give a sense of, I mean, you've just been in and around AT&T, DirecTV. Just give people the 30-second version of this, the 10-second version of this.

• 4:19Speaker 05

  Well, I don't know if I could do it in 10 or 30, but I'll try. You can edit it down. How's that?

• 4:24Nilay Patel?

  Sure.

• 4:24Speaker 05

  Look, I've been, you know, I've been around the sort of AT&T companies for longer than I probably would like to admit. But I've actually been in, you know, I've been in this industry also a little longer than I'd like to admit. I was at, I was at DirecTV for, you know, a good chunk of time, had a number of jobs, you know, roles there. And, you know, when AT&T came knocking to acquire the company, I was running the digital products group. So I was essentially charged with, you know, transitioning a satellite pay-TV operator into a modern world of, you know, digital and mobile, you know, content aggregation and delivery. You know, I'd be lying if I told you that I was excited to sort of come along for the ride when AT&T came along.

• 5:07Speaker 05

  But, you know, given the work that I was doing and the platform that AT&T was and the vision that John Stankey and Randall Stevenson had to bring connectivity and content together, I jumped on board and, man, I have just never looked back, you know? When I was at DirecTV, I spent five years trying to build DirecTV Now, right? Try to take the company over the top. And it took me five months at AT&T to sort of make that pivot, which ultimately is, you know, kind of what led to, you know, a moment like yesterday with HBO Max. So I did that for a bit. I was, I was the head of strategy, kind of sat along John for a bit of time, worked on the vertical integration strategy to sort of get into the content space.

• 5:50Speaker 05

  I had oversaw the, you know, the investment in Outer Media and at the right time, sort of took the helm of that business and turned it from, you know, what was essentially a set of venture investments to an operating company. And then last year, John Callahan asked, asked if I'd be interested in taking the charge and taking the lead on HBO Max. And, you know, I was ecstatic and giddy. So here, here we are.

• 6:13Nilay Patel?

  So HBO Max, the streaming service is part of Otter Media inside of AT&T. You're the CEO of Otter Media and that reports up into the larger Warner Media portfolio, which reports to AT&T. I just want to make that org chart is, I think most people don't see it, but your, your group is in charge of HBO Max, the service.

• 6:33Speaker 05

  Yeah. So I report into Warner Media Entertainment, which is Bob Greenblatt's division inside of Warner Media. And, you know, I'm overseeing the portfolio of Otter Media companies as well as the, you know, as well as the development and launch and the business operations of HBO Max.

• 6:48Nilay Patel?

  AT&T is just like such a big company and there's many, many names. So I want to make sure people get a sense of your responsibility. That said, it launched yesterday. Congratulations. That's always exciting. How'd it go?

• 7:00Speaker 05

  Look, I've, I've been around, you know, launches of new products for a long time. I've done a few and so I've seen, I've seen the good, I've seen the bad, I've seen the ugly. Yesterday was a pretty incredible day. I mean, you know, we, we, we launched a product, I think seamlessly and we put an incredible volume of great stories in front of consumers. The passion and engagement that we're seeing around the content offering is just, you know, it's incredible. And so, look, all in all, we had a great day yesterday. The team had a great day. The company had a great day. You know, the ink is dry on chapter one and we're having to start writing chapter two now.

• 7:43Nilay Patel?

  Just give me a quick, like a sense of on a launch day, how are you spending your time? Are you just watching a dashboard of signups? Are you on the phone? Are you just watching old episodes of Aqua Teen Hunger Force? Like, how are you spending your time?

• 7:58Speaker 05

  Yeah, look, success in an organization is when you build systems under which, you know, people sort of take the helm and run with something of this order of magnitude, right? And so you spend a long time sort of organizing and putting, you know, people in seats and laying out priorities and building process to enable a seamless launch.

• 8:23Speaker 05

  And so I was actually talking to somebody about this earlier earlier this morning. I love being in the engine room. I love touching. I love being, you know, close to the metal. But obviously, the environment we're in right now doesn't allow for, you know, physical war rooms to be, you know, to be part of the launch plan. And so we had to virtualize just about everything. And so I spent a good amount of the last couple of days on calls, you know, just sort of ensuring that folks had the resources that they needed to go. And then on Slack channels, watching the activity. And, you know, again, supporting the team when they needed to be supported and getting out of the freaking way when they didn't need anything from me.

• 9:07Speaker 05

  But, you know, monitoring a Slack channel or two or three and just watching, watching the team sort of hit go on X platform, hit go on Y platform, you know, identifying issues and, you know, quickly resolving them. That's how I spent probably my last, my last 24 hours or so.

• 9:24Speaker 06

  I am interested, just because now you guys are officially, I think, in this streaming war space in a way that even with DirecTV now, which is now AT&T TV now, wasn't in many ways. By this time in November 2019, after day one launch, Disney had come out and said we hit 10 million subscribers. They were very happy with that. And I know Stanky the other day said, we're not trying to compete with Netflix. We're not trying to compete with Disney. But the level of success tends to be measured now in the streaming war space with subscriber numbers. And I know that you can't give them to us unless you would very much like to give them to us. But I'm interested to know where your levels are in terms of people coming on with new customers versus people rolling in

• 10:06Speaker 06

  from HBO now subscriptions and kind of through their own cable packages that you have partnerships with.

• 10:11Speaker 05

  Yeah, look, we're not, we're not in the place to reveal numbers. Though I think it feels to me like you're going to ask me that a couple of times today.

• 10:18Nilay Patel?

  Like six times. It's on here like easily six times.

• 10:22Speaker 05

  Early, early, early, early innings. But I think a couple of things I think to that question. You referenced streaming wars a couple of times in that question and I have to tell you, I just have a very different perspective of of that term. Like, I think it's, I think it's largely a misnomer. Like, we're not at war. We're just in a period of change in how consumers engage with content. I like to think about it as we're in a period of re-aggregation of content and you're seeing these super networks emerge. And it doesn't look that different than when broadcast TV launched, when you had a few television channels, networks that aggregated content, delivered it over broadcast. And we're sort of in a position now where, you know, content is being aggregated at a much, much larger scale

• 11:05Speaker 05

  and in around these incredible brands and delivered over the internet. And so there's room, I think, for more than one, I think, is, is the, and so it's not a, it's not a zero-sum game. It's not a winner-take-all. I really think we're just, you know, we're in a period of like, super networks are emerging and it's, it's great for consumers.

• 11:23Speaker 06

  It is fair to say, though, that you guys are currently at war with Roku and Amazon. Like, there's, there's a debate happening and in many ways, it's like a reverse carriage dispute that we're seeing. Um, where these aggregators now have a lot of power because people are using them to watch the streaming services. It's why Disney made a lot, you know, 11th hour deal with Amazon. It's why we're seeing all these things happening. Obviously, you guys did an 11th hour deal with Comcast yesterday. Um, Amazon, Stanky has pretty much said, probably not going to happen right now. Roku, the obvious question, he did insinuate at a recent conference that the partnership was coming. When is that coming? Because it was funny to me yesterday, seeing Roku trending above HBO Max because people were like, how do I watch this on Roku?

• 12:07Speaker 05

  Yeah, look, you being on the platforms that, being available on the platforms that consumers use to access these, you know, these new networks, really, really important. But there are certain business models that, that exist and we each sort of have our own. Look, we, I just go back to the fact that I think we're just starting from a very, very different place. Look, we have thirty plus million existing subscribers that have already gone in their pocket and voted to subscribe to a product and we're making that product better. We think the value proposition is there. We just want to be treated fairly. We want to, you know, look, you can't Disney Plus and Netflix and Hulu and these other apps, you know, are on the, are on those platforms and there's a certain business model

• 12:52Speaker 05

  that, that exists. Um, and we just, you know, we just want, you know, we, we just want the same one. And, uh, and ultimately, I look, I, I'm hopeful that ultimately we'll get there and we'll get there with the consumer in mind, but you know, uh, we just didn't get there day one.

• 13:07Speaker 06

  Have those thirty million subscribers you mentioned automatically upgraded? Are they now in the max space that you're seeing? Cause it feels like that's the obvious upgrade. So you guys should have, you know, max should launch with thirty million, uh, cause there's, that's a customer base you're already rolling up. Are you seeing that translate one hundred percent?

• 13:24Speaker 05

  We're not, um, like I said, I'm not, I'm not, I'm, that's, see, that was the second time you asked about, about numbers.

• 13:30Nilay Patel?

  I shouldn't have told you it was six.

• 13:34Speaker 05

  Not, I'm not in a place to sort of go into the details on the numbers, but look, we can do the math in and around, you know, how many, you know, how many MVPD subs, um, how many HBO subscribers, sorry, uh, have access to the product? And, uh, you know, we think we've got a compelling, compelling content offering and, but it's just not a sprint. Like it's going to take, it's going to take time. It's going to take time and we're, we're excited about the journey.

• 13:58Nilay Patel?

  Let me, let me just try to unpack the, the Roku dispute for the audience a little bit, because it is, it's really complicated. Um, on every level, and I just want to get your perspective on it and also hope, hopefully have the listener kind of understand what's going on. So Roku makes almost no money selling hardware. They make all of their money taking a cut of in-app purchases, running ads, all that kind of stuff. Are you saying that the deal that the Netflix and the Disney's get on the Roku platform, you're not getting, they're not offering you the same deal or you want a better deal than the Netflix's and the Disney's get for in-app purchases, signups, spiffs, all that stuff?

• 14:34Speaker 05

  Look, I don't know what specific deals that others have with either Roku or any other platforms. But I know the deal that we have with Apple. I know the deal that we have with Google. I know the deal that we have with the with the other platforms. And there's a certain business model and we're happy to pay people to help us acquire subscribers. And it's again, it's a pretty standard way of doing business. And so I don't want to get too deep into the details of the, you know, of the impasse, if you will, that we're in right now. But, you know, but there's, there's a pretty standard way of bringing these apps to market on these platforms and

• 15:16Speaker 05

  and we're, um, you know, and we're, we're focused, we're, and that's, that's what we're focused on doing.

• 15:22Nilay Patel?

  I'll just ask, are you just, are you like, you're just gonna hold out until like the Snyder Cut hits? And then like an army of DC fans are like, I want this on my Roku and they have to cave? Cause that's like what happened with like Fox and the Super Bowl, right? At some point Fox just had to cave and give Roku subscribers the Super Bowl. Are you, are you saying eventually that the demand isn't be so high that Roku is just gonna have to cave?

• 15:43Speaker 05

  Look, I, you know, I don't know if caving is actually the, the way to think about it. I, I just, I think the consumer wins at the end of the day. And I think we've put together a product offering that has multiple Snyder Cuts, right? It's got multiple. It's, it's got, it's.

• 16:01Speaker 06

  Is that a positive or a negative that there's multiple Snyder Cuts?

• 16:05Nilay Patel?

  No.

• 16:07Speaker 05

  Hey, look, I, I referenced Snyder Cut. I, the reference to Snyder Cut there is that it's a, it's a passionate fandom.

• 16:13Nilay Patel?

  Yeah.

• 16:14Speaker 05

  Right? There, there's a passionate fandom around Friends. There's a passionate fandom, you know, around Harry Potter. There's a passionate fandom around, I mean, you name it on that platform, the DC, you know, the DC library. Uh, there's a passionate fandom around Crunchyroll, passionate fandom around Studio Ghibli.

• 16:31Speaker 06

  There is a difference though between a fandom around the Snyder Cut, which has targeted a lot of directors who have worked with Warner Brothers, has targeted groups on Twitter. Um, and although there's positives of that fandom, there are a lot of overwhelming negatives, which many smart critics have written about. There's difference between that fandom and a, and a Friends or a Harry Potter, which hasn't necessarily gone out of their way for three years to demand certain things in the kind of way that the Snyder Cut fandom has. And I wonder. If you worried all about the precedent that sets, because right after that came out, there started, we're going to get an air cut for Suicide Squad, a David air cut. And I genuinely wonder if that was something that Warner Media took into consideration when they made that cut, was this, what does it look like, the precedent that it sets right now?

• 17:17Speaker 05

  Yeah, look, definitely not a precedent. And you're right, there's different types of fandoms. There's, there's the fandom fandom you just described and there's, and there's, you know, there's other fandoms. I just, my reference to the fandoms is the fact that we're in a space where, you know, consumers are loud, consumers guide, and yeah, like, we have to, you know, we absolutely have to listen, you know, as industry. I had a boss that, you know, once said, you know, industry and consumers aren't always aligned, but consumers do tend to win. But it's a fine balance. And I think, you know, I think when it comes to video, when it comes to entertainment, when it comes to content, consumers have never had more choice and they've never had

• 18:02Speaker 05

  more of a voice. But look, that doesn't mean that you have to go or that we will, you know, go and, you know, invest our dollars in every single pocket and every single fandom that exists. But I think the reference to the Snyder Cut and the Friends fandom is the fact that, you know, consumers are speaking and we have to, we have to listen. And, you know, it doesn't mean that we're going to go redo every movie every, ever made. But I think that we have to be, you know, we, we definitely have to have our ear to the ground. And I think we do. I mean, look, I just go back to like, look at the buzz that the Harry Potter library sort of brought us yesterday. It was like a wonderful surprise and delight.

• 18:45Speaker 05

  It's because consumers are passionate, you know, about these franchises.

• 18:49Nilay Patel?

  So there's, I have a, just not to over compare it to Disney, but when Disney Plus launched, similar buzz, but oh my gosh, here's all the Star Wars movies. Again, they've been hard to get. And then another thing that I heard, particularly in the nerd world I live in is, wow, I can watch all those Star Wars movies in 4K HDR with Atmos, right? They got remastered for streaming. You can deliver them at higher quality. HBO Max so far, no 4K HDR, no vision, no Atmos. Is that stuff coming? Was that on the roadmap and just too hard to do? Is that a remastering problem? What does that look like?

• 19:22Speaker 05

  Yeah, look, there are, I can, you know, man, if you want to go have, I'm not going to go have a feature dialogue with you, but as somebody that likes to get close to the metal, I can tell you that there are a lot of, there's a lot of features, right? And a lot of, a lot of capabilities that we'd like to, that we would have liked to launch with that we didn't. It just comes down to like a matter of priority and getting a product to market. It's not, what you're, you know, when you're asking about 4K and HDR and Atmos, like not unimportant, and definitely something on the roadmap. It had to be a deliberate choice, right? Like of what to launch with and when? And look, those trade-offs happen, they happen daily. And, and so, look, it'll, it'll come. It wasn't, it wasn't forgotten. I think it was just a, it was a deliberate prioritization.

• 20:06Nilay Patel?

  But you're gonna have to go and remat, if you said you can watch all of Game of Thrones in 4K HDR and when we, in the scenes that are too dark, aren't too dark anymore, and it's an Atmos audio, so you can hear the dragon, everyone would just re-watch Game of Thrones tomorrow, right? And you would drive that subscriber base. Is that on your mind as a thing that you think will drive subscribers?

• 20:26Speaker 05

  Look, you have to remaster, you have to re-ingest, you have to build capability into the product, and then you have to sort of step back and, and say, is that something you do today? Or is that something you do in a month? Is that something you do in three? Against what other priorities? And so, yeah, do I, I don't like, do I think that it'll, yes, it'll, every individual feature or capability has an opportunity to drive customers and to drive acquisition, drive engagement. And look, we think, we think video quality is, is one of them for, again, a certain A certain type of consumer and certain fan base. So, you know, I'm excited for the day that, look, I'm a geek.

• 21:07Speaker 05

  I'm as much of a product and a tech geek as I am a business geek. And so, you know, I personally can't wait for the day that I can, I can re-watch Game of Thrones to your, to your, to your example, you know, in 4K and HDR and Atmos. And, and that day will come, along with many, many, many, many other features and functions, like, you know, that the team is, team is, you know, the team is working on diligently.

• 21:31Speaker 06

  You mentioned that there were certain things you just had to leave off at launch because you're launching these, we know these things happen, you, weeks, months ahead, you start working on things. When HOMX did launch yesterday, there were a couple of people on Twitter, more than a couple, uh, who were pointing out that there were search problems, that certain episode mis- uh, misfunctionings were happening. And I'm just wondering, what are the biggest issues that you guys saw on day one? Because every company that launches a streaming service has issues, like, it just happens. And what are your most high priority right now in order to get fixed?

• 22:03Speaker 05

  Yeah, look, there's, um, you know, there's a, there's a, there's a long list, but it's actually not as long as, as one would expect. And I think you, you just pointed to some of the, you know, some of the opportunities and some of the things that people are working on. You know, so largely, you know, metadata, which then ultimately is what sort of drives, you know, drives some of the search issues, et cetera, um, is one of them. And the team is working on that today. I think that's largely the issue. I mean, look, I can go down, I can go down a long list of things that people actually haven't seen that, you know, that exist.

• 22:41Nilay Patel?

  I'll trade you, I'll trade you one of the user number questions for one of those issues. How's that? We'll just do a horse trade right here.

• 22:49Speaker 05

  No, we're not going to do that. We're not going to do that.

• 22:52Nilay Patel?

  I was a shot, I gotta take my shots where I get them, man.

• 22:55Speaker 05

  I, like I said, I, I've been through a number of these launches. We had a really solid launch yesterday. Uh, you expect, you expect some issues. And like I said, I think the issue that you're pointing to is, is one. But, you know, this is a, this is pretty solid, uh, all in all.

• 23:12Speaker 06

  There was a thing that went around Twitter, things go around Twitter often. There was a thing that went around Twitter yesterday that I thought was funny, and I just wanted to get your opinion on it, which was somebody noted that HBO Max didn't crash, which is very impressive because Disney Plus crashed when it launched. And someone pointed out, I wonder if that means that there just weren't as many people signing, like playing it at once, that there weren't that many people on it compared to the overuse on Disney Plus. Again, not to look at numbers and user numbers, but specifically like what was that day one activity? Like, were you guys seeing spikes the minute it kind of launched? Or was it pretty steady throughout the day? Were you guys seeing the usage numbers you wanted to see day one?

• 23:54Speaker 05

  Julia, I gotta commend you. You are so good at your job. You were trying 15 different ways to kind of get, to kind of get at an answer.

• 24:02Nilay Patel?

  That's four, by the way, I just want to point that out.

• 24:04Speaker 05

  I'm just gonna, it's four, I'm just gonna put it to the nth degree because I'm sure it won't be the last. Here's another, like, here's just another example of like, we're just starting from a completely different place. This is the platform that had 5 million concurrent users on a Sunday night watching Game of Thrones. So we've been through the scale, the scaling, you know, journey of the platform. Like, we didn't start writing code from scratch. We started redesigning apps from scratch. We started building, you know, building new features from scratch. But this is a, it's a pretty strong foundation that we, that we built on, right?

• 24:43Speaker 05

  And so, but here's what I will tell you, just to get you, just to give you a little bit of a nugget. We were incredibly pleased with the amount of engagement that we had on a per-user basis on the platform. The fact that there was double the content on the platform versus what exists on HBO, the fact that the content was indeed broader and appealed to multiple demographics, definitely gave us a sense of comfort that it was resonating, that it's resonating with consumers. Now, we gotta go sustain that, right? And so, look, a lot of focus, right, on yesterday and sort of the launch of yesterday. But let's remember, man, this is a long, long road. We closed chapter one, we are now writing chapter two,

• 25:27Speaker 05

  and this is gonna be, this is gonna be volumes and volumes and volumes. It's not gonna be one, it's not gonna be, it's not gonna be one Moby Dick. It's gonna be many, and we're just at the beginning.

• 25:40Speaker 00

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• 26:41Nilay Patel?

  So you brought up the notion that, you know, you've already had a platform doing this. This is something to me that I didn't quite realize. HBO Max is built on the bones of HBO Now, right? When I got the app yesterday, my HBO Now app upgraded to HBO Max. Is it the same basic infrastructure there?

• 26:59Speaker 05

  Yeah, it's the same. It's the same infrastructure that, you know, that then was built, was adapted for, you know, multi-tenancy, right? So the HBO Now app had all of the HBO service. HBO Max now, built on that platform, has the HBO service as well as a variety of other, we'll call them, content hubs. And so we had to, you know, we sort of had to adapt to that. And then, yes, we had to build incremental functionality and, right? You know, curation and editorialization of content, the download capability, et cetera. But it is at the core. It's the HBO Now platform, which, like I said, had nearly 5 million concurrent users at peak with, you know,

• 27:44Speaker 05

  and supporting Game of Thrones.

• 27:46Nilay Patel?

  So I think this brings me to the kind of the big question with AT&T's media properties in general, which is that there are a lot of them. They all have very similar names. And it seems like just understanding how to get HBO Max, how to get it maybe bundled into your Wyler Steel or with your cable subscription, or how it relates to HBO Go or AT&T TV Now, or all of the other things. It might be a DirecTV subscriber. Is that going to get cleared up? Because it seems like that is the biggest confusion that AT&T as a company needs to solve is directing people to the appropriate product offerings and making it simple to just buy them.

• 28:30Speaker 05

  So is your question, is it going to get simpler for people to buy HBO Max?

• 28:35Nilay Patel?

  I think my question is, can you name all of the HBO media properties that exist and how much they cost? Because I couldn't right now. And yesterday, when people were asking us, we were like, do we need to just write an article to service the reader interest in how many AT&T properties are there and how do they relate to each other?

• 28:55Speaker 05

  Yeah, look, Millie, it's actually two. I think those are like two different, it's two different questions. And so I'll take them in those buckets. Look, AT&T is a holding company and AT&T has many products, including broadband products, including mobile products. Yeah, it's a portfolio of consumer and business to business products. One of those portfolios is the media company in which HBO sits. So I'm going to take the video question and sort of like I said, in like two buckets. One, it's the direct to consumer, sort of more SVOD on-demand kind of bucket. And then the second is the MVPD piece. And AT&T TV

• 29:37Speaker 05

  has been sort of, we'll call it the rebrand of a variety of AT&T video offerings. And that's where the company landed. And so they're in the process of rebranding. But that's the MVPD product, right? That's the pay TV product. I think the question you're ultimately asking is a question that's not unfamiliar to me, because we get asked a lot. It's like HBO Go, HBO Now, HBO Max. And so let me try to simplify.

• 30:11Speaker 05

  If we were starting from zero, it'd actually be really easy because there wouldn't be any legacy. But there wouldn't be any subs, uh, there wouldn't be any, any, any, any, any libraries to sort of build from. And there wouldn't be any revenue to build a new product from. And so, yeah, is it complicated? Sure. But will I take an existing business with an incredible content library and incredibly iconic brand? That is aspirational like HBO versus zero? 100%. I'll take the blessing and the curse all at the same time. Now, you're asking a very, very specific question and I actually think it's important to kind of get to that question. HBO Max is our platform and it's going to be our workhorse.

• 30:56Speaker 05

  I said it during Investor Day, I've said it in a couple of interviews, and I think it's really, really important to do that. All that said, we are not leaving customers behind. If they choose to engage with HBO Go and that's where a cable subscriber wants to consume HBO content, we're going to let them for a period of time. And you pointed to your experience with HBO Now, which is the app just got upgraded. And so where we can and where we feel it's appropriate, we'll upgrade the app. I think in the next three to six months, we're, it's going to become evident that HBO Max, right? Is our, right, is our workhorse and is our, you know, and is the platform where multiple brands will come. But, you know, we've got, we've got, we've got consumers to serve, we've got business partners to serve. And we're in a bit of a transition.

• 31:42Speaker 05

  So, you know, look, I, I commend you for the question because it is, uh, it's an interesting one and it drives a lot of dialogue. But, you know, Apple and Google users yesterday got an incredible surprise and delight when their HBO Now app just, just upgraded itself to double the content, downloads, editorial, et cetera, et cetera. You know, ultimately, ultimately, ultimately, we'd love to get everybody there, but it's, it's a bit of a, it's just a bit of a transition period. And like I said, I'd, I'd rather take the transition than start from zero.

• 32:15Nilay Patel?

  You said HBO Go customers will service them for a while to come. You know HBO Go is the app you use if you have an existing cable or satellite subscription and you want to log in with your cable credentials and stream over the top, right? That's actually the app I use more than now. I pay for everything. I really got to stop it. Anyway, cord cutting is obviously dramatically exhilarating. Everyone's betting that we're just going to move to services like HBO Max in the future, pay all a cart. Are you just expecting HBO Go to kind of disappear over time as people just cut the cord?

• 32:48Speaker 05

  Actually, what we're expecting, given the success that we've had in closing, you know, closing the deals with the MVPD community, is that subscribers start using HBO Max as a place to get their HBO service as well as all this other content. And it's such time that we feel like a good volume, if not the entirety of the base, is engaging on that, on that platform versus another, we'll make a decision. But right now, I mean, you just said it, man. Like, you know, you, you prefer to go to use HBO Go. I really encourage you to use HBO Max primarily because it's got more content. And if, if you're

• 33:27Speaker 05

  using HBO Go because you're a cable subscriber, chances are that you can just, you can just log in, you know, to HBO Max. Now, look, on the AT&T front, you asked, you asked another question, which is how to get it. And that's another one. Like, how incredible is it for a company to have built-in distribution and be able to give consumers incremental value for being a connectivity sub, right? Like, if you're an AT&T premium mobile or broadband or TV sub, you get HBO Max and don't come out costs. I think what often gets forgotten is how important scale distribution is in the direct-to-consumer world. And

• 34:09Speaker 05

  this company has 3.2 billion interactions with consumers every year. I mean, how strategic is that as part of an offering when you're, when you're coming into market like this? And so I look at, again, embedded bases.

• 34:24Speaker 05

  Legacy products, companies that have been around a long time, you know, it's a gift. Quite frankly, I think what we have, we just have to navigate the education, right? For consumers, but consumers have a lot of opportunities to get into HBO Max in a way that I think other folks just, just don't have.

• 34:43Nilay Patel?

  So, you know, it's funny, we've been talking about TVs and TV platforms, but it's AT&T, AT&T, it's like a mobile carrier, that's a big business. Have you gotten to the point where you're thinking HBO Max is going to get preloaded on AT&T phones, we're going to bundle the pricing in different ways? I mean, that's the real win of AT&T owning WarnerMedia, right? Is building new kinds of packages for mobile. Has that happened yet? Or is, are we just, we gotta launch it, we gotta figure out our Amazon deal? Like, where are you in that thinking?

• 35:14Speaker 05

  No, look, that's, I mean, arguably, that's where we, that's where we're starting. You know, if you have a, you know, premium unlimited tier of, of, of AT&T mobile, you get HBO Max included. I mean, if you go to at&t.com today, and, you know, all of the ways that you can get, that you get HBO Max are there. So it is bundled, it's preloaded on the Android phones, it's preloaded on the Android, on the Android OS, AT&T TV box, and it's included with a variety of AT&T packages. So, like I said, that's, that's extremely strategic. Like, you know, we have a company that engages with consumers at mass, mass scale, that has packaged and embedded, bundled, the HBO Max product.

• 36:00Nilay Patel?

  Does HBO Max hit the AT&T data cap on mobile?

• 36:03Speaker 05

  Well, if you're, if it's packaged on, if it's packaged in the unlimited plan, right? It's unlimited. And so, you know, by, by nature.

• 36:12Nilay Patel?

  Well, there's still like a 22 gig, I think it's 22, right? It's unlimited, but after 22 gigs. Your speeds drop and then there's, there's like the video saver. If I want to just watch HBO Max all day on AT&T LTE, does that get preferential treatment to a Netflix or something?

• 36:29Speaker 05

  Yeah, you know, it shouldn't well, no, we are, again, this is a fairly broad question. I can't get preferential treatment and, and it wouldn't. We're, you know, treating, treating data the same way for, you know, for everyone. And so as of, as of right now, it's included in the, it's included in the unlimited data package. I actually, I don't know the answer frankly to that question. And I think this is one of the things I, I kind of drive my team on like, it's okay to say, I don't know. So I don't know the answer to that specific question, other than it's included in the unlimited package. But we circle back with that.

• 37:07Nilay Patel?

  Yeah, I'm here. I mean, it, it just seems like that's an obvious, as you're talking about AT&T scale, its touchpoints with consumers. It, it feels like the reason a company like AT&T would want to make a huge investment in Warner Media, in building out a platform like HBO Max, and then obviously in this country, without sort of the net neutrality rules, it would be very easy to say, our platform is going to stream for free. It's going to have higher video quality. It's not, it will always have the fastest data channel available to you versus the suite of, I mean, that's just an obvious advantage AT&T could give itself. It sounds like if you don't know, then maybe you haven't even had the conversation.

• 37:46Speaker 05

  Oh, no, look, we've had the conversation. I don't, I don't know where we landed. I think on, on the specifics of, on the specifics of data caps. And so I think that's, you know, something, something I personally have to go circle back on, but I think to your point, the opportunity is to redefine the bundle, right? You know, connectivity and content kind of coming together in the same way that it came together in the early days of the triple and the quadruple play. And, and I think that's what we're starting to see at this point in time, right? Like the network is the plumbing and the content is the water. And you're seeing water and, you know, the water and the plumbing kind of, you know, kind of come together.

• 38:25Nilay Patel?

  Not usually what you, you got to work on the metaphor.

• 38:29Nilay Patel?

  Usually don't want the plumbing in the water, but I take your point.

• 38:34Speaker 06

  Bringing it back to the kind of HBO Max as a streaming experience, there were reports, I believe, last year that there would be an advertising supported component coming that would be a cheaper tier. I'm wondering if there's any development news on that? Is that still planned? And if so, what is the branding for that? Is it like TJ Maxx HBO Max where you get like an extra X at the end? And that's kind of how you know that's the ad supported version? Like I'm just, because I feel like AVOD is just as, within the SVOD world is just as crucial. And I know it's something you guys are thinking about. Is that something you're planning to launch 2020 or is that a 2021 goal, 2022?

• 39:10Speaker 05

  Julia, I am going to invite you into the next marketing and branding meeting because I think

• 39:16Nilay Patel?

  Yes.

• 39:17Speaker 05

  that was brilliant. Brilliant. Brilliant.

• 39:21Nilay Patel?

  That's a commitment, by the way. Julia's coming to your next branding meeting.

• 39:24Speaker 05

  That is.

• 39:25Nilay Patel?

  That's our next feature.

• 39:27Speaker 05

  Talk about a sneak peek, you know, behind the curtain look. Not many get that invitation, by the way. Look, we're on day two of the subscription offering that we've worked really, really hard to get to. And that's, I don't mean to punt the question other than like, that's what I'm focused on right now. And that's what team is focused on right now. That said, I think as a business, a two-sided business model for, you know, a content aggregation platform is really, really important. And we are evolving our advertising based offering

• 40:06Speaker 05

  and strategy. Nothing more to kind of share at this point because again, we are myopically focused on what's in front of us right now. But we do think it's important that we bring consumers a variety of different offerings, a variety of different price points. And you know, this is, this is just, this is sort of just the beginning.

• 40:25Speaker 06

  Yeah, let's talk about the price point because the $15, I know there's a $12 one year thing that HBO Max has, which I believe is like about par with Netflix's most popular plan. People were very excited by it, but normally it's 15. And I'm wondering if that is a, I saw that you mentioned that that was what you landed on. And I wonder if there's room for you guys to lower that in the future, especially in this current market where people are losing their jobs. $15 is a lot of money to spend on a streaming service compared to a Disney Plus, uh, which is $7, even an Apple TV Plus, just $5. And I'm wondering if there's a chance for you guys to bring that down, or if that gets into concerns with the carriers, where that's a staple at $15 is in the cable packages.

• 41:07Speaker 06

  You can't go below that. It's what every other kind of distribution partner you're working with is offering at.

• 41:12Speaker 05

  Look, um, a lot of consumers can get it for free. I've referenced it and I'll, I'll continue to reference it. You know, 30 plus million subs today, many of which can just download an app and log in with their provider's credentials and don't have to pay a penny more. So that's number one. Number two, you know, a lot of ATT customers, uh, can get it for free. You just bundled into their connectivity and TV products. And so there's a lot of opportunities to get this product at a lot less, right? If not entirely less, right? At zero versus the $15 direct to consumer price point. As far as price points concerned, you don't go into these things blindly.

• 41:53Speaker 05

  And there are business implications and there are consumer implications on price points. We could have gotten higher because we doubled the, the amount of content. We chose not to do that. We chose instead to give people twice the content for the same price as we're offering HBO. Because those HBO subs have essentially already voted, right? That they would pay. And so, look, pricing evolves, pricing will evolve over a period of time. You referenced one opportunity to sort of get to a more affordable price point, uh, and sort of brought in the funnel with advertising. But again, we have, you know, we have, we have a product that I think.

• 42:34Speaker 05

  Think offers a pretty unique value prop in the fact that, you know, it's got an incredible amount of content, high quality content. And, you know, we landed on the price point, um, actually fairly comfortably. And I think what got us there, frankly, is that there are opportunities for consumers to get the product for less than 15 bucks, you know, across, across a variety of, of different channels.

• 42:58Speaker 06

  Do you mention content and I would not be doing my job if I didn't address arguably the biggest conversation with streaming right now, which is the wars with the theatrical bottle, like what's happening right now. Warner Media obviously brought Scoop to pivot uh, premium video on demand and it will eventually go to HBO Max. Warner Media made a lot of news when you guys announced a new studio, which is dedicated to kind of building these mid-tier films that will go kind of directly to Max, directly to premium video. How do you guys think about what gets a theatrical release versus what doesn't? How is that pipelining work? So a lot of people still see it as if this goes to a streaming service exclusively, it's not as good as what would end up in a theater. Uh, and although that might feel like an outdated idea, I think it's how people still picture it. Cause if it's a big movie,

• 43:43Speaker 06

  why wouldn't it just go to the theater? But you guys are investing super hard into content for HBO Max specifically. And I'm interested in what designates like what gets the HBO Max release versus what gets a much wider theatrical release?

• 43:56Speaker 05

  Yeah, look, I, I wish I can give you a formula. Uh, the reality is like, you know, these things come down sort of on a case by case basis. The one thing I think is important to sort of just, you know, to tackle in this, in at this time and, and, and then with this issue in particular, is that, you know, the COVID situation has sort of required a number of businesses to sort of rethink, you know, how they go to market and how they get to consumers. And I think we've, we've seen the premium VOD space kind of be an outlet for, you know, for films, seeing streaming platforms be an outlet for films. But unlike series,

• 44:37Speaker 05

  where there is more than sort of one hour or two hour slot, films are sort of a, the features are sort of A one-shot deal and and so it's so early in in the game here to really understand the value of a feature versus a series, right? In a in a streaming platform. Um, but I think, you know, the options are vast at this point in time. Look, I I was at DirecTV a long time ago. I ran what we called upgrade marketing at the time, which essentially is existing existing customer revenues. It was the TVOD store. It was a premium business. It was a live events business. And we were one of the first at that point in time to test premium VOD. And we just opted not to progress.

• 45:21Speaker 05

  Uh, because, you know, the math didn't work. The question is, is the math going to work now for premium VOD? At what level of investment in a film? You know, is a is a $500 million film? Uh, is it is it viable to sort of lean into premium VOD and or streaming for distribution? Can you get enough value back versus a 30, 40, 50 million dollar film? Or a $10 million film? And so I can't give you specifics in and around how we as Warner Media are gonna lean. Um, or how we as HBO Max are gonna lean specifically in and around our films. We think features are important uh for the platform.

• 46:02Speaker 05

  And so we're in an incredibly interesting period of change uh with respect to this topic. And I is gonna be a ton of innovation and a ton of test test and learn and a ton of trial. You know, kind of coming down the pike and will I'm fascinated by this, but by by what this conversation will be in one year. When we're over this challenge and we're when we've had an opportunity to uh to test and learn uh in a meaningful way.

• 46:33Nilay Patel?

  So let me, we've only got a few minutes here. I want to zoom out. You've you've brought up a couple of big themes uh several times. One is the idea that we're re-aggregating that there's these new super platforms or super networks that are being built. Another one is. Just distribution. Obviously, AT&T is a big distribution network. It seems like there's a pretty big tension between who owns the interface of your TV service, who gets to bill you, what bundle that bill gets you, right? Like, Apple, for example, we talk about this on the show all the time. They desperately want their TV app to actually just be the interface of the Apple TV. But it's like, not quite good enough.

• 47:15Nilay Patel?

  And Netflix won't give them the data or the show recommendations. You decided to do it. Like, who do you think ends up owning sort of the customer relationship? Because if I look at it with a long view, I'm paying you $15 a month. I'm paying Netflix some money. I'm paying Disney some money. I don't know where shows are. Like, search and discovery is hard across all those things. I'd rather just, like, pay a cable company just, like, one amount of money and get their guide and have it be really good. Like, it feels like we're just cruising right back towards that model.

• 47:44Speaker 05

  Yeah, look, I think there's like, love this question. And too bad we only have a few minutes left.

• 47:50Nilay Patel?

  I feel like every time you've said that, what you've meant is, I hate this question, and I'm eager for this to be.

• 47:55Speaker 05

  No, look, I, I mean, we can talk shop about this stuff all day long. We are undoubtedly in a period of re-aggregation. Like, I know this is going to sound lame, but like, you think back, you know, broadcast, a few channels, then cable and satellite emerged, lots of channels, you know, which arguably were the curators more so than the aggregators. And, you know, the cable and satellite companies were the, were the mass distributors. They were the ones sort of at the tip of the spear with the consumer relationship. The internet changed that. The internet changed that in a, in a, in a, in a meaningful way. And it's a, it's a gift.

• 48:34Speaker 05

  And, you know, it enabled what we're seeing today, which is these, this, this re-aggregation of content that gets consolidated into a super network, which we call an app. But you've still got to get it to the consumer. And so the question is, is there another version of the cable distributor emerging? And what does that look like? You know, is it Comcast X1 and AT&T TV? Is it a social platform? Is it the app stores? And I think there's a, there's no, like, I can't give you an answer as to what it's gonna be. But like, I am incredibly excited, sort of like, playing in this and playing in this space with a

• 49:16Speaker 05

  platform like HBO Max, with a content offering like HBO Max, where we can command the attention of consumers. And we can command it well. And so, look, I don't know where this is gonna end up, but I really like, I like our hand. And I think there's a way to sort of thread this needle. I mean, you look at, you look at what we're doing on the Apple TV app experience and you can search for just about, you can search for all the content that is on HBO and HBO Max. But it plays back on the HBO Max app. That seems like a good, that seems like a good balance. Where you can search and discover.

• 49:58Nilay Patel?

  Is that a good business balance for you because they're still up in your app? Or is that the correct balance for the consumer? Because I look at that as a, you know, a consumer technology critic. And I'm like, Apple's interface is designed to confuse me. Like, there's a business compromise here where you want them in your app and Apple wants to own the, the sort of search and discovery interface. And that means I, as a user, rarely know where I am as I use the Apple TV.

• 50:23Speaker 05

  Yeah, but look, Neil, the flip side to that is, as a consumer, you can jump into the HBO Max app and the ideal business and consumer, you know, sort of endpoint is that you never leave and that you never have to go watch content anywhere else, right?

• 50:40Nilay Patel?

  So, yeah, that's, but that's your ideal outcome. Like, I, there are still shows on other platforms that I'd like to watch, right?

• 50:46Speaker 05

  Yeah, and so, we're in a place of either the consumer accepting and engaging, right? With the universal search that exists or the universal, or you know, or the, or the discovery app that exists on the platform, or going individual apps. And I think the answer for now is gonna be both. What this looks like. In, you know, two, three, four, five, 10 years, a bit of an unknown, but again, pretty fascinating to sort of be in the middle of it and be in the middle of it with a platform and an offering like HBO Max.

• 51:20Nilay Patel?

  All right, we are now, I think, fully out of time. I ask every CEO this question, so I want to, I want to make sure I ask you too. It has nothing to do with any of this. When do you work? Like this is, I literally ask every CEO this question, mostly because I just need the advice. How do you bracket your time so you can find time to, you know, use all your competitor apps or like write the email instead of just being in meetings all day long?

• 51:42Speaker 05

  Yeah, that's a, that's a tough one. I work when I need to work. I have found, I have found, I like as I've, as I've worked more and more years, I have found that balance and priority are really, really important. And so sort of creating a bit of a division. So I'll give you an example, like have two phones, have a personal phone and have a work phone. The idea there is to absolutely just absolutely separate email. There was a time where my work phone doesn't leave my home office and is not in my pocket where I have to completely disconnect. But for me, given that my teams are so spread out, I do tend to go later as opposed to earlier, right?

• 52:22Speaker 05

  So I'm in New York, you know, I tend to start my day nine, nine thirty as opposed to seven in the morning because I'm going till about eight or nine at night, just to sort of, you know, keep up with the West Coast. I have young kids, I have that, that I'm lucky enough to still like me, that they're thirteen and sixteen. I love spending time with them. And so weekends to me tend to be really, really sacred, you know, before COVID, I was on a plane all the time. And I just made it, I made it not only a goal, but an absolute rule that, you know, I was home by Friday and I spent the weekend with my kids. And so creating space to spend, spend time with family, I tend to go a little bit later.

• 53:07Speaker 05

  And I do tend to use the time that I have in the morning to, to really just chill, like do things that I, you know, do things that I enjoy, kind of get, just get into a good, you know, into a good mind space.

• 53:18Nilay Patel?

  That's great. All right. Well, Tony, thank you for taking all of the time. It was only five. So just last question, how many subscribers do you have?

• 53:27Speaker 05

  We're starting, we're starting, we're starting from a different place than others, Neil.

• 53:31Nilay Patel?

  I love it. All right. Thank you so much for joining us. We'll have to have you back soon. This was a great conversation.

• 53:35Speaker 05

  All right. Thanks, guys. Take care.

• 53:38Nilay Patel?

  All right. My thanks to Tony Goncalves from HBO Max. We really came at that dude. I think he did a pretty good job. Also, thanks to Julia. She did great. We'll be back on Friday at the chat show. There's obviously just a ton of news going on right now between the pandemic, the protests. There's still tech news happening, so lots to unpack on Friday in the chat show. And then next Tuesday, we'll have another interview show and on and on it goes. We've got just an incredible slate of interviews coming up. I'm just really proud of this lineup. We're moving things around to be on top of the news, but I don't think you're going to be disappointed. That's coming up on Tuesday. Tweet at me. I'm at Reckless. I love your feedback on the show. Love hearing who you want me to talk to, what you want me to talk about. It is incredibly useful and I really appreciate it. I hope you're staying safe. I hope you're taking care of yourself. I hope you're expressing yourself. We'll talk to you soon.

• 54:27Speaker 08

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