The Ratings Game: Don’t worry, AT&T won’t ruin HBO, analysts say

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Viewers are voicing their worries about the future of cable network HBO under AT&T Inc. ownership, but analysts are confident that the network will continue to push out quality content.

Since the New York Times  published an article over the weekend detailing a recent town hall with new Chief Executive of WarnerMedia, John Stankey, HBO fans have been asking whether the network will be able to maintain its quality standards. The network’s parent company is WarnerMedia, formerly Time Warner, which was purchased by AT&T

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  for $85.4 billion last month.

Read more: Changes afoot for HBO under AT&T’s new reign

Over the past 16 years, HBO has won more Primetime Emmys than any other network. It is beloved by critics and viewers alike. But the network, home to such hit shows as “Game of Thrones” and “Westworld,” has long been a boutique operation, emphasizing quality over quantity, something that has set it apart from competitors like Netflix Inc.

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  and Amazon.com Inc.

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which are spending billions more on content.

Stankey, a veteran AT&T executive, described to HBO employees a future with “more frequent engagement” and a brand that’s “broad enough to make that happen,” according to the Times. His vision is a media company whose users engage with content for “hours a day. It’s not hours a week, and it’s not hours a month. We need hours a day,” he said. For Stankey’s vision to come to pass, HBO will need to bulk up.

Alarm bells rang across the Twitterverse:

“Good to know @ATT is on a mission to destroy @HBO,” one person tweeted. Another warned, “Hey @ATT, you better tell your boy John Stankey that if he screws up HBO, this will not go well for you.” “Say goodbye to the @HBO you knew. The deranged have assumed control,” another tweet said.

Media and culture writers chimed in.

Stankey’s “desire to upend the network’s careful approach to putting out new shows (it only makes a handful per season) could mean the end of HBO as we know it,” wrote David Sims, a staff writer at The Atlantic who covers culture.

HBO’s “one great skill is curation,” wrote Engadget senior editor Daniel Cooper. “If you’re an HBO subscriber, you know that its shows will be lavish, well-made and well-written… This trust would be undermined by Stankey’s ‘more is more’ plan, and with it, the whole point of HBO,” he wrote.

Analysts, however, are not worried.

Daniel Ives, head of technology research at GBH Insights, acknowledged that in an acquisition like this, “you worry about loss of talent, creative losses and the culture that was a big part of its success.” But he expects HBO to continue producing high-quality shows under AT&T. The network is too important a part of AT&T’s overall strategy.

“HBO is the key lynch pin in a broader streaming strategy for AT&T from a content perspective,” he said.

Although Stankey never mentioned Netflix  by name in the town hall, the streaming giant’s shadow looms large over the industry. Netflix has over 100 million subscribers globally, and has said it plans to invest up to $8 billion in content this year.

BTIG media and technology analyst Richard Greenfield said parts of Stankey’s discussion about competing for “hours of engagement” echoed Netflix’s long-term view, where the streaming company discussed competing for “a share of members’ time and spending for relaxation and stimulation, against linear networks, pay-per-view content, DVD watching, other internet networks, video gaming, web browsing, magazine reading, video piracy, and much more.”

”HBO and its legacy industry peers are going to have an increasingly difficult time acquiring the best content as Netflix’s global platform grows,” Greenfield wrote in a note. “While the power of the HBO brand still matters today, if a competitor is multiple times their size, HBO may simply not be able to compete for projects.“

Read now: The spectacular rise and fall of MoviePass

In other words, HBO needs to expand quickly, and that’s the right way to go. “Sitting still or even increasing investment slowly is a losing strategy,” Greenfield wrote.

See also: Netflix is trouncing the competition and it should stay on top—younger viewers love it

Based on the network’s history, “they will not let quality slip,” said Michael Pachter, managing director of equity research at Wedbush Securities, in an email. “It’s the wrong conclusion to draw from the Stankey meeting.”

“It will take 4-5 years to double their original content, so the rate of change will be very slow. I expect that you’ll see no more than a 20% increase in originals in the 2020 lineup, and if they work, they’ll keep investing. If not, they’ll change their strategy,” he said.

AT&T shares have fallen 17% in 2018, while the S&P 500

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 has gained 3.9% and the Dow Jones Industrial Average

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 has added 0.2%.

Sarah Toy reports on the media for MarketWatch. She is based in New York.

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