As Warnermedia Faces Massive Layoffs Hbo Max Is Both Cause And Cure

First reported by The Wall Street Journal October 8, the AT&T-owned company plans a restructuring that will cause job losses at Warner Bros. studios and television channels such as HBO, TBS, and TNT. The impending layoffs are part of an effort to reduce the company’s costs by up to 20 percent.

“Like the rest of the entertainment industry, we have not been immune to the significant impact of the pandemic,” a WarnerMedia spokesperson said in a statement to IndieWire. “That includes an acceleration in shifting consumer behavior, especially in the way content is being viewed. We shared with our employees recently that the organization will be restructured to respond to those changes and prioritize growth opportunities, with an emphasis on direct-to-consumer. We are in the midst of that process and it will involve increased investments in priority areas and, unfortunately, reductions in others.” Related ‘I Hate Suzie’ Is the Perfect Feel-Bad Show for the Holidays How ‘South Side’ Pulled Off a Hilarious Batman Parody Tribute Related Oscars 2023: Best Documentary Feature Predictions Oscars 2023: Best Makeup and Hairstyling Predictions
Though WarnerMedia is not the only entertainment company to lay off a large number of employees during the coronavirus pandemic — Disney laid off around 28,000 in its parks and resorts business in late September, while NBCUniversal axed “less than 10 percent” of its 35,000-person team in August — WarnerMedia previously laid off around 800 employees between Warner Bros. and HBO in August. This second wave comes after months of troubles for the company. HBO Max launched in May and had around 4.1 million subscribers about a month after launch according to WSJ. That paled next to subscription numbers for Disney+ and Netflix, and did not offset declines at WarnerMedia cable networks such as TNT, TBS, and TruTV. WarnerMedia made significant investments in HBO Max prior to launch. In the company’s January earnings report, AT&T chief financial officer John Stephens told investors that investments in HBO Max reduced AT&T’s Q4 2019 revenue by $1.2 billion. However, Brad Gastwirth, chief technology strategist at Wedbush Securities, said consumers have flocked to competing streamers in recent months. “WarnerMedia may be looking and relying too much on the old HBO brand name and not recognizing the new wave of consumption,” Gastwirth said in an interview. “If you look at Netflix, Hulu, and other streaming services, there is a significant amount of content that is more differentiated than HBO Max, while Disney+ is open to a whole new consumer group that is more kid-based, which HBO Max doesn’t really target. When you add the $15 per month cost of HBO Max and compare it to other services, consumers look at other platforms as more attractive.”

According to Doug Clinton, managing partner of tech VC fund Loup Ventures, the company’s efforts were too little, too late. By the time a new streaming service launches, he said, it’s crucial for consumers to have a clear understanding of what it offers. “Part of the problem is that customers still don’t understand the difference between HBO Max, HBO Now, and HBO Go,” Clinton said. “Netflix, if I make a simple comparison, has one product. For streaming services, your biggest rush of new subscribers will come at launch and customers were dealing with that confusion at launch. Even after getting rid of HBO Go and rebranding HBO Now, they still have to re-engage with potential subscribers.” WarnerMedia also faced challenges in the film industry, as the coronavirus pandemic has forced most movie theater chains to close. The company distributed Christopher Nolan’s expensive “Tenet” to theaters and while the film was not a global box-office bomb, it failed to attract large audiences in North America. In the weeks following the premiere of “Tenet,” WarnerMedia delayed the theatrical premieres of other high-budget films such as “Dune,” “Wonder Woman 1984,” and “The Batman.” Gastwirth and Clinton agreed that, like most other entertainment companies that rely on box-office revenue, WarnerMedia has failed to adequately adapt to the nationwide theater closures. Both cited Disney’s release of “Mulan” on Disney+ as an example of how film distributors could circumvent at least some of the financial challenges posed by Americans’ unwillingness to visit movie theaters. Disney has not provided data on the release of “Mulan” on Disney+ but IndieWire’s Tom Brueggemann reported in September that early signs suggested that the film, which Disney+ subscribers can view for $30 (the film will become free for subscribers on December 4), has enjoyed strong viewership numbers. “The ‘Tenet’ box office was a disappointment, but we should have expected the worst in retrospect,” Clinton said. “There’s been a shift from movie theaters and amusement parks to things at home, like streaming services, video games, and social media. Given the environment, we should recognize the reality that customers have adapted to the new life in the pandemic and are making media choices in line with that.”

There is no quick solution for WarnerMedia or other entertainment companies to reverse their fortunes. As streaming video continues to increase in popularity, Gastwirth said that it will be critical for WarnerMedia to draw customers to HBO Max, especially given the company’s investment in the platform. “People are looking for news shows and some of these traditional TV channels aren’t getting the same viewership that they were previously,” Gastwirth said. “I think WarnerMedia needs to come up with a new marketing plan to establish users for HBO Max. It could be a lack of marketing or a lack of overall content, (but) WarnerMedia needs to have more of a hook to get people on their streaming service.” Sign Up: Stay on top of the latest breaking film and TV news! Sign up for our Email Newsletters here.