California best-known for lending DVDs by mail, launched
a service streaming movies and TV over the internet.
An idea spread through HBO: What if Time Warner bought
Netflix? It would be the perfect marriage of art and science
and give Time Warner enormous leverage over the down-
stream markets for TV shows and movies. The concept made
its way up the chain of command, where it was duly slain. HBO
and Time Warner executives thought the roughly $1 billion to
$1.5 billion it might cost would be better spent on program-
ming. “There was a belief that Netflix was going to implode,”
Gabriel says, “either due to the escalating costs with their
model or due to content no longer being licensed to them.”
By 2018, Netflix was generating $1.2 billion of annual net
profit on $15.8 billion of revenue. Its current market value
is $154 billion.BO expanded its streaming service in 2010 to existing
TV customers in the U.S. through a mobile and desk-
top service called HBO Go. Cable and satellite affili-
ates would handle headaches involving customer service, while
the company would pay to program and maintain the apps.
As Netflix began its hundredfold ascent in market value,
it attracted reams of favorable press and industry observ-
ers began to see it as an existential threat to HBO. In a
December 2010 New York Times interview, Bewkes, who by
then was overseeing all of Time Warner as CEO, weighed in
on his competitor. “It’s a little bit like, Is the Albanian army
going to take over the world?” he said. “I don’t think so.”
Inside HBO, however, there was growing acknowledgment
that streaming products would be a vital part of the future.
This led to skirmishes to claim control and credit for HBO Go.
Otto Berkes, a relative newcomer to the network who’d spent
much of his career at Microsoft Corp., won out.
In December 2012, HBO named Berkes its next chief tech-
nology officer. Until that point, the implementation of the com-
pany’s internet strategy had relied on outside vendors for such
things as designing user interfaces. Berkes told colleagues HBO
would be better off developing and owning its own streaming
technology and interfaces, as Netflix did. He wanted to create
a platform that could stream not only HBO’s programming but
also all of Time Warner’s.
In addition to HBO, Time Warner owned Turner50
Broadcasting System Inc. (home to the Cartoon Network, CNN,
TBS, TNT, and Turner Classic Movies) and Warner Bros. (Harry
PotterandTeen Titans Go!, among many other franchises).
Combining these entities into one streaming service was tan-
talizing. In theory, the brand managers should have worked
together as part of the same conglomerate. But in practice,
each property acted like an independent nation-state.
Building a streaming platform from scratch was expensive.
It could have cost hundreds of millions of dollars before any
significant revenue began flowing in. While Berkes attempted
to loosen the corporate purse strings, he began assembling a
team of engineers and product designers inside a new HBO
office in Seattle. In New York, key members of the internet
team departed. In February 2013, Netflix premiered House of
Cards, one of its first big forays into HBO-esque programming.
“The goal is to become HBO faster than HBO can become us,”
Ted Sarandos, Netflix’s chief content officer, toldGQ.
Sarandos didn’t need to worry. In April 2014, when fans
logged on to HBO Go to watch the fourth season premiere of
Game of Thrones, the service crashed; it continued to do so
on successive Sunday nights. Howling subscribers inundated
social media.
While the tech team in Seattle worked to fix the problems,
it wasn’t always on the same page with the businesspeople in
New York. That spring, HBO licensed the network’s library to
Amazon Prime Video, the giant retailer’s streaming service. For
HBO it was a high-margin arrangement that would pad profits.
(Cantor Fitzgerald analyst Youssef Squali estimated the deal
would be worth $200 million to $400 million a year to HBO
over a four-year period.) But the move didn’t sit well with some
members of the tech team, who worked near Amazon.com
Inc.’s Seattle headquarters and saw the company as a fierce
competitor. Training people to go to Amazon Prime Video to
watch classic HBO shows, they worried, could undermine the
appeal of HBO’s own internet offerings.
While questions remained about HBO’s long-term vision,
short-term emergencies intervened. In June 2014, Rupert
Murdoch’s 21st Century Fox Inc. made a surprise $80 billion
bid for Time Warner. Bewkes rejected the offer, but it ratch-
eted up the pressure on him to wow Time Warner investors.
That October he made his own unexpected announce-
ment: HBO would soon unveil an internet subscriptionH
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THE COMEBACKFather of Dragons: Plepler’s Progeny at HBOJune 5, 2007: Plepler becomes HBO’s co-presidentRotten Tomatoes score: 100 50 or lower 2010 2013IN TREATMENT