HBO Max exec Tony Goncalves has been 'chasing this for about half of my career'
Disney Plus is a tough act to follow, even for an entertainment giant like HBO. But the exec who oversaw HBO Max's development is delighted.
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Tony Goncalves, the executive overseeing the development of HBO Max, presented plans for service in October.
HBO Max -- the latest in a parade of streaming services, this one from AT&T's WarnerMedia -- launched Wednesday in the US after months of hype. For some people, helming the rollout of an app with a multibillion-dollar lineup of programming in the middle of a pandemic might be vexing. (Ask Quibi.) But Tony Goncalves, the overseer of HBO Max's development, says he's living the dream.
"I've been chasing this for about half of my career," Goncalves, the CEO of WarnerMedia's Otter Media, said in an interview Friday. "And so to see this day come, with such banner content behind it, is actually pretty ... amazing."
With people across the country stuck entertaining themselves at home without live sports, new blockbuster movies or any kind of theater or concert mass gathering to entertain them, coronavirus lockdown has put streaming services in even greater demand.
HBO Max is one of the final entrants in the so-called streaming wars, a seven-month window when media giants and tech titans are releasing a raft of new streaming services to take on Netflix. These competitive battles -- pitting rookies like HBO Max, Disney Plus and NBCUniversal's Peacock against heavyweights like Netflix and Amazon Prime Video -- have spurred huge corporations to pour hundreds of millions of dollars into the hope of shaping the future of television.
The rivalries also affect you: They'll influence how many services you'll need to pay for and how much you'll have to fork over to stream your favorite shows and movies, especially as more of that programming gets locked up by different players.
Goncalves, like a lot of streaming executives, says streaming wars is a misnomer. To him, this landslide of new services marks the rise of "supernetworks."
To me, "supernetworks" sounds like something from The Matrix. That sci-fi blockbuster is one of the Warner Bros. movies HBO Max stream for subscribers, but Goncalves says there's no family resemblance.
"It's actually not that different than the advent of television, where you had two or three core networks that aggregated content," he said. "You're seeing a bit of a reallocation of that content, and these super networks are emerging -- but they happen to be apps delivered over the internet."
The following is an edited transcript of an interview with Goncalves.
Q: At $15 a month, HBO Max has one of the highest price points of its rivals. Make the pitch: Why do you think that, given a lot of other services have large catalogs of premium content, people should choose HBO Max if you're asking them to pay more?
Goncalves: You don't go into any of these decisions blindly. You actually go ask consumers what they think. And so there is an element here following the data. We didn't magically come up to the $14.99 price point. We did an extensive amount of research, early on to identify the value proposition and the right price point.
Our research indicates that today consumers have two to three streaming platforms, and they pay $15 to $20 for those collectively. But their willingness is actually higher, right they're willing to pay for four to six, and up to about 40 bucks. So consumers are telling us this is not a zero sum game.
I wholeheartedly believe that in these in these platforms, content is the product. Period. We have an unprecedented collection of content, iconic brands and franchises.
Q: The decision for HBO Now to be $14.99 was made years ago, so you're saying WarnerMedia reopened the question of whether that was the appropriate price now?
Goncalves: Yeah, absolutely. Since the very beginning of this idea to create HBO Max, we've looked at the price point. We had to, with the competitive environment, value proposition for consumers and just business needs. And we landed very comfortably where we are. Because again, it's following the data.
Q: The launch is coming at an unprecedented time because of the coronavirus and COVID-19. How much has the coronavirus disrupted content production?
Goncalves: Production has absolutely been impacted, there's no question. Kevin [Reilly, WarnerMedia chief creative officer] and Sarah [Aubrey, HBO Max head of original content] have done such an incredible job filling the pipeline that we're in good shape.
Tony Goncalves
The good news for us is that we weren't planning to be anchored exclusively on originals. There's an incredible library that exists, both within HBO as well as across the balance of the product that a whole generation or two have yet to discover, in the same way that my 16-year-old daughter discovered Friends a couple of years ago. I don't underestimate the value of our library.
Q: People talk about a rising tide lifting all boats. The fact that Disney Plus had such a gangbusters first six months, surpassing 50 million subscribers -- has that changed your perception about how much the tide is rising? Has that changed any outlook for HBO Max?
Goncalves: Well, we haven't changed our budget and we haven't changed our outlook.
Once we get past launch, we can relook at all of our numbers and all of our expectations. We're really comfortable with what we put out there for investors that's sort of our hurdle. [In October, WarnerMedia predicted HBO Max would hit 50 million subscribers in the US by 2025.] For us, we're not just starting with zero, so the calculus is a little bit different. We're not going from zero to 10 million or 20 million. Our goal is to give 30 million-plus [existing HBO] customers much more value than they had yesterday and then bring many more consumers into the family.
The fact that there's been success in new entrants definitely supports the strategy that we're embarking on.
Q: Last week HBO Max announced that next year it would release the fabled "Snyder cut" of 2017's Justice League movie. As one of my colleagues put it, how many more disappointing movies will get the same treatment? And is there any concern about creating an entitled fandom mentality?
Goncalves: Zero comment on the first part of that question.
To the second part, look, there's a fandom around Friends, which is why the reunion is such an epic moment for television. Look, I go back to: The consumer absolutely has to guide your decisions, and given what we've put together, it's pretty evident that we've that we've listened.
Q: What's up with important distribution deals that are still missing? Roku? Amazon and Fire TV? And big pay-TV providers, like Comcast, that have yet to be announced as giving Max to their current HBO subs?
Goncalves: We're working diligently to close as many distribution deals as we possibly can. We want this product to be as broadly available as possible. We believe consumers are going to want this product across across all platforms. And we'll continue working to try to achieve that goal.
Q: What are the sticking points that make deals like these tough to win?
Goncalves: When you think about media companies and how they're adapting, we've largely been -- as an industry -- in the wholesale business. You make something, and then you wholesale it somebody else, who packages it, distributes it, sells it to the consumer and has that relationship with the consumer. That's changing. We're shifting as a whole from wholesalers to retailers. And anytime you have a shift in an industry like this, there is going to be tension. That's the macro tension.
And then you sort of get into the nitty gritty and it's what you would imagine: It's economics, it's marketing, it's packaging, it's a variety of things, but it's not unique to us. You've seen the deals that we've announced; I think we've been really really successful.
Q: What's your attitude about password sharing? Most services use limits on simultaneous streams as the main line of defense against too much casual password sharing, but will HBO Max be more aggressive?
Goncalves: There's two camps in the industry generally, which are: It's the absolute best form of marketing, or it's pure theft.
Our approach will continue to look like it looks now, which is a certain number of concurrent streams, a certain number of registered devices, etc. In the back end, we'll be looking and managing against some of these more extreme cases -- a subset of customers that you see are streaming on tens and hundreds of devices, despite still staying to the three-concurrent limit. And I think over time the industry is going to have to tackle the problem as the world becomes much more app-driven. We've taken a fairly balanced approach, and we're just focused on not making it the consumer's problem.
