Case Application $1$

Environmental Uncertainty at HBO

HBO is one of those company names everyone knows. It's the oldest and second$-$largest pay TV station in the US$.$ Since the early $1990$s$,$ it has been developing original programming. That's much longer than Netflix and Amazon. HBO shows like Game of Thrones, The Sopranos, and Westworld have won Emmy and Golden Globe awards. HBO includes seven $24-$hour channels as well as the streaming service HBO Now. It has about $130$ million subscribers worldwide.

That all sounds like HBO is doing well, right? Looking more deeply, though, there is a lot happening in $HB{O}^{\text{'}}\text{'}$s environment.

Over a million households got rid of their cable TV subscriptions during a three$-$month period in $2017.$ That's much faster change than experts expected. By $2030,$ the cable and satellite TV market is estimated to shrink by $26$ percent. That would leave only $60$ percent of American households as subscribers to pay TV$.$

Meanwhile, smart phone usage keeps climbing worldwide each year. The number of smart phone users in $2018$ was estimated at $2\mathrm{.}53$ billion. By $2020,$ that number is expected to climb to $2\mathrm{.}87$ billion.

Also, HBO is now officially part of the AT&T$-$Time Warner family. The merger became official as of July $12,2018.$ Other companies in media and telecommunications industries, like Comcast and $20$th Century Fox, are talking about combining forces. Meanwhile, Apple has set aside $$1$ billion to get in on the action of streaming original content. Competing in these industries is different than it used to be$.$

John Stankey, the AT&T executive in charge of HBO, has made it clear that there will be a lot of change in the company. "It's going to be a tough year. It's going to be a lot of work to alter and change direction a little bit," said Stankey. At a recent town hall meeting, Stankey talked about HBO increasing its subscriber numbers and the amount of content offered. This is a different approach from $HB{O}^{\text{'}}s$ emphasis on quality over quantity.

Focusing on quality worked for almost two decades. HBO had the most Emmy nominations from $1999$ to $2017.$ Then, in $2018,$ Netflix beat out HBO with a higher number of Emmy nominations. The sheer volume of Netflix's shows is credited as the reason for its launch to the top. Plus, HBO only spends about one$-$quarter to one$-$third of what Netflix spends on developing new content. Some of HBO's productions in the past have taken years to develop and cost millions per episode.

Stankey wants HBO to try new approaches and add other types of content than what is currently offered on HBO Now, its streaming service. He offered these glimpses of the future saying that there would be fewer streaming companies. Figuring out how not to just survive but to thrive in

this industry will be the challenge.