Why HBO Max's WarnerMedia Welcomes Competition in Streaming Arena

January 8, 2020

Andy Forssell, Executive VP and General Manager of WarnerMedia Direct-to-Consumer, and WarnerMedia Chief Technology Officer Jeremy Legg explain how they are approaching the launch of HBO Max in April.

FULL TRANSCRIPT

FEMALE_1: Welcome back to Cheddar Business,

FEMALE_1: HBO front and center at the Consumer Electronics Show in

FEMALE_1: Las Vegas to promote it's upcoming

FEMALE_1: HBO Max streaming service.

FEMALE_1: Cheddar's Michelle Castillo sat down with Andy Forssell,

FEMALE_1: Executive Vice President and

FEMALE_1: GM of Warner Media Direct-to-Consumer,

FEMALE_1: and Jeremy Legg, Chief

FEMALE_1: Technology Officer of Warner Media,

FEMALE_1: to talk about the upcoming streaming service.

FEMALE_1: Take a look.

Michelle Castillo: So Netflix, um, said that they

Michelle Castillo: actually welcome more streaming services into

Michelle Castillo: the Eco space because it's encouraging people to

Michelle Castillo: move away from linear channels, more towards streaming.

Michelle Castillo: Do you guys agree that this isn't really

Michelle Castillo: a competitive battle between

Michelle Castillo: streaming services right now,

Michelle Castillo: but more just getting people to

Michelle Castillo: adopt linear- I mean to adopt streaming?

Andy Forssell: Yeah, I think that's a really interesting point

Andy Forssell: about the industry evolution because we

Andy Forssell: talk about a lot- we

Andy Forssell: talk a lot about that internally with the team.

Andy Forssell: We're not competing head to

Andy Forssell: head to try and convince someone not to,

Andy Forssell: not to subscribe to Netflix.

Andy Forssell: I think all of us are working on,

Andy Forssell: how do we make things better for consumers,

Andy Forssell: and that competition question will

Andy Forssell: play out over five, six, seven,

Andy Forssell: eight years where the,

Andy Forssell: the question is not who wins,

Andy Forssell: but what collection of services ends up

Andy Forssell: being the one that the

Andy Forssell: biggest number people subscribe to.

Andy Forssell: And that's gonna be a great experiment,

Andy Forssell: it's gonna be fun for everyone,

Andy Forssell: I think fun for consumers.

Andy Forssell: They're going to have a lot of

Andy Forssell: great content at their fingertips.

Michelle Castillo: So [inaudible 00:01:16] famously did a study and it said that

Michelle Castillo: people only want to subscribe to four services right now.

Michelle Castillo: Do you think that there's space for one more

Michelle Castillo: or I guess there's plenty more launching next year?

Andy Forssell: I, I think that punditry is really hard. None of us know.

Andy Forssell: We don't even know as consumers, right?

Andy Forssell: Each of us. How many would I subscribe to?

Andy Forssell: That's changing,

Andy Forssell: uh, in a changing landscape,

Andy Forssell: that number is going to change.

Andy Forssell: So nobody really knows.

Andy Forssell: I think where we start is, you have to matter to people,

Andy Forssell: you have to make shows that matter sort of week in,

Andy Forssell: week out, month in, month out,

Andy Forssell: year in, year out, uh, and

Andy Forssell: we've got a great track record with

Andy Forssell: HBO and with Warner Brothers as

Andy Forssell: a whole and the Turner Nets in doing that.

Andy Forssell: So we feel good about being able to

Andy Forssell: compete in that landscape and matter to consumers.

Andy Forssell: Um, but again, not head to head,

Andy Forssell: and it will be interesting to see what

Andy Forssell: those numbers turn out to be.

Andy Forssell: I think consumers- uh,

Andy Forssell: I think that number will be higher than people

Andy Forssell: think because I think consumers

Andy Forssell: will understand and learn how to

Andy Forssell: navigate the landscape as it evolves.

Michelle Castillo: So from a technology standpoint, um,

Michelle Castillo: a lot of marketers are talking about the ability

Michelle Castillo: for connected TVs and for addressable advertising,

Michelle Castillo: um, and one thing I know that

Michelle Castillo: HBO Max on launch won't be ad supported.

Michelle Castillo: What's, uh, your thought- and HBO

Michelle Castillo: traditionally hasn't been ad supported.

Michelle Castillo: Are you guys thinking about that in the future?

Michelle Castillo: Maybe creating an ad supported version.

Andy Forssell: Yeah. Let me just say one quick thing.

Andy Forssell: I'll turn over to Jeremy, I think.

Andy Forssell: Absolutely, sort of medium to long term, um,

Andy Forssell: ad supported versions of these services get

Andy Forssell: them out to a broader audience and that's a good thing.

Andy Forssell: We absolutely want to harness that.

Andy Forssell: I'll let you talk a little more about where you're going.

Jeremy Legg: Yeah, we, we do plan to have an ad supported service.

Jeremy Legg: We announced that in Investor Day,

Jeremy Legg: you know, at, uh, lot of part of last year.

Jeremy Legg: But I would say from a technology standpoint,

Jeremy Legg: inserting ads into content

Jeremy Legg: on the Internet is not a new thing.

Jeremy Legg: So, you know, that's been happening

Jeremy Legg: with TV everywhere for years.

Jeremy Legg: That's been happening on ad

Jeremy Legg: supported websites for a long time.

Jeremy Legg: The question is, is how do you build

Jeremy Legg: an ad experience inside of these products

Jeremy Legg: that's different than the traditional ad experience

Jeremy Legg: and is more targeted,

Jeremy Legg: more relevant to consumers and

Jeremy Legg: the ad experiences that have

Jeremy Legg: existed in other parts of the Internet?

Jeremy Legg: So that's something that we're going to need to work

Jeremy Legg: through as we figure out our AVOD product.

Jeremy Legg: But right now, we're, you know, we're focused

Jeremy Legg: right now on getting the SVOD product out.

Jeremy Legg: We've got a launch coming up in

Jeremy Legg: the spring and that's

Jeremy Legg: definitely the most important thing.

Michelle Castillo: So besides HBO Max,

Michelle Castillo: what does the future of media look like

Michelle Castillo: for the next, um, 10 years?

Michelle Castillo: Do you think we'll all be moving to streaming?

Jeremy Legg: I'll take this from a tax standpoint and also

Jeremy Legg: give it to Andy to talk about the business side.

Jeremy Legg: From a tax standpoint,

Jeremy Legg: I think where this stuff is headed is that you're

Jeremy Legg: going to have technology platforms that

Jeremy Legg: begin to allow companies to monetize in multiple ways.

Jeremy Legg: We're starting with subscription services,

Jeremy Legg: you're gonna have ad supported services,

Jeremy Legg: you're going to begin to have pay per view

Jeremy Legg: transactional and other kinds

Jeremy Legg: of ways of monetizing content.

Jeremy Legg: That doesn't mean that the traditional wholesale,

Jeremy Legg: you know, side of the business is going away.

Jeremy Legg: But I do think that you're going to

Jeremy Legg: have a balance between

Jeremy Legg: wholesale distribution as well

Jeremy Legg: as direct to consumer distribution.

Jeremy Legg: And as you build out direct to consumer,

Jeremy Legg: you need multiple ways to monetize the content.

Jeremy Legg: That drives a whole set of technologies

Jeremy Legg: underneath the hood that content companies haven't

Jeremy Legg: necessarily wanted to build or- or desired

Jeremy Legg: to build in the past that we do- you

Jeremy Legg: have to start building in the future.

Andy Forssell: I just had to think.

Andy Forssell: It's gonna be great for viewers.

Andy Forssell: Um, more content is getting made than ever.

Andy Forssell: And that's, that's a great thing.

Andy Forssell: More experiments are being

Andy Forssell: done than if you go all the way

Andy Forssell: back to the broadcast world with three networks.

Andy Forssell: The amount of ex- experimentation now is-

Andy Forssell: is- is amazing compared to those days.

Andy Forssell: And I think that'll increase.

Andy Forssell: So that's good for all of us.

Andy Forssell: You're going to see the technology,

Andy Forssell: I mean we can we can already watch

Andy Forssell: many things on almost any screen

Andy Forssell: that exists. That's great.

Andy Forssell: It's- it's great to help people

Andy Forssell: watch more easily and find things they love more easily.

Andy Forssell: Um, and so I think that will all continue.

Andy Forssell: I do think the hurdle that we all

Andy Forssell: have to take- the- the challenge we have to take on is,

Andy Forssell: how do we get much better at helping

Andy Forssell: people find something new?

Andy Forssell: Right now, it's still pretty traditional advertising,

Andy Forssell: both digital and- and- and,

Andy Forssell: um, and- and non-digital.

Andy Forssell: Huge budgets are spent to introduce people to new things.

Andy Forssell: We talked at our- our media- our Investor Day,

Andy Forssell: a little bit about some early ways that we

Andy Forssell: have to- to try and help people find new things.

Andy Forssell: One was recommended by humans,

Andy Forssell: just some interesting recommendations in

Andy Forssell: the app that are a little different than what you see.

Andy Forssell: We want to experiment

Andy Forssell: really aggressively to go in that direction.

Andy Forssell: I think all of us as viewers understand

Andy Forssell: it's too much work to find something new to watch.

Andy Forssell: And traditional advertising is

Andy Forssell: a really expensive way to- to

Andy Forssell: get us all comfortable to try something.

Andy Forssell: So we're excited about that challenge.

Andy Forssell: I think the next 10 years you'll see

Andy Forssell: v- vast improvements in

Andy Forssell: that and as- as viewers we'll all benefit.

FEMALE_2: So looking at an overall CES, um,

FEMALE_2: what's the next consumer problem that hasn't been solved

FEMALE_2: by tech yet that you think? Putting you on the spot here?

Jeremy Legg: Yeah. You know, I- I- I would put it- I would

Jeremy Legg: put that into the search and discovery category.

Jeremy Legg: The amounts of content that

Jeremy Legg: exists inside of these services,

Jeremy Legg: whether it's what our own service

Jeremy Legg: has or services that are out there,

Jeremy Legg: there are thousands and thousands of hours of content.

Jeremy Legg: It's been tried through algorithms in order to-

Jeremy Legg: to provide those recommendations to consumers.

Jeremy Legg: There's been some success with that.

Jeremy Legg: There's some balance between

Jeremy Legg: curation and algorithms associated

Jeremy Legg: with search and discovery for consumers where

Jeremy Legg: I don't think the sweet spot's been hit yet.

Jeremy Legg: And that's the thing that we have to be able to

Jeremy Legg: focus on to differentiate our service from others.

Speaker 7: Okay. Michelle Castillo there at CES.