HBO : A Cautionary Tale for Netflix | Episode 33

Welcome to Perf Damage, a movie podcast hosted by a husband and wife team who work in the film industry . Adam works in production and Charlotte works in film restoration, and together they uncover and discuss stories both new and old about Hollywood.

In this episode, Adam and Charlotte explore the incredible journey of HBO in four chapters: its humble beginnings, meteoric growth with shows like "The Sopranos," prestigious years filled with awards, and the current identity crisis as streaming platforms like Netflix reshape the industry. 

Join them as they dissect HBO's journey, share insights, and ponder the future of this iconic network in the ever-evolving landscape of entertainment. 

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Transcript

HBO

I'm not sure Oh, no, not again.

Hi, I'm Adam and I'm Charlotte. Welcome to Perf Damage. The weekly podcast hosted by a movie obsessed husband and wife team who work in the film industry. We'll share stories of film production and restoration. We'll review and recommend. We'll examine the minutiae of subgenres and even microgenres. And most importantly...

We will tackle the art of the double feature. Just remember, all our opinions are our own and do not represent those of our employers.

Thank you for joining us. Welcome.

Hello and welcome to Perf Damage. Yeah. Welcome back or welcome for the first time. My name is Charlotte and I work in film restoration. And I'm Adam. Uh, I worked in film development for 10 years. And now I work in film production. Yeah, we're a husband and wife team who talk ad nauseum about movies. All things movies.

All the time. Only things movies. Movies and wine. We do like wine. We do like wine. Today we're having a cab fronk. So if you like wine and you like movies, go grab a bottle or a glass. We'll wait, it's fine. Whatever you want. Yeah, let us know when you get back and then we'll start. So Adam, there's a lot of interesting stories out there in the trades about streamers and if they're viable for studios, if they're viable as their own studio and what the future holds for them.

And you recently read the history of HBO. You read a book about that and found a lot of really interesting parallels with how HBO started and the streamers and their whole stories. Which left us to wonder. Will they go down the same path? Will they go down the same path? Uh, the parallels are pretty crazy.

When you actually analyze this story and how similar it is to their rise, their exponential growth, their move into production, original content, original content, uh, winning awards, um, all of that, it's a very similar path. A lot of parallels, and But HBO finds themselves in a very perilous position now.

They do. Um, not to say that they're dead or on the verge or anything like that. No, they're still, you know, a highly recognized brand. But unfortunately, they're now a brand that is literally just a brand. They're a page within an app. That's all they are. They don't have an identity outside of that. So, um, which is sad, which is something that could happen to all of these streamers if they don't, you know?

Yeah. So HBO as a?

Cautionary tale. Yeah, should they be the road map? You know, uh, cuz a lot of them have patterned themselves after HBO and will they ultimately be the new or the next HBOs? Whatever that means. I don't know. We'll find out. We will find out. Stay tuned. We'll talk about it for sure. We'll talk it out. We'll figure it out.

Yeah. Alright, so to hear Adam's cautionary tale of HBO in four acts.

So Adam, we mentioned wine. What are we drinking today? Well, today we have, um, a Cobb Frunk. Oh, let me grab the bottle. Yes. By eleven. Which is a sub label of Andrew Murray. We really love Andrew Murray. We really love this label too. It's pretty cool. Yeah. And this is his funky fun brand where he, you know, um, will plant new grapes and limited supplies.

And make tiny batches of wine. And we like it. We're not sponsored. We just like it. We like it. A lot. And we had people ask, what wine were we drinking? So, now we're telling you. Ha ha ha. Part 1. HBO. The Early Years. Let me just ask you a question off the top here. Uh oh. Um. I didn't know there was going to be a quiz.

What year do you think that HBO started? Well, you already asked me this question, so I'm assuming you want me to tell you the answer. I'm setting it up so that people can enjoy it as if this were the first time. Okay, so you asked me this question, and I guessed 1981. Yes. And you were shocked when I revealed that actually it was 1972.

Yeah. I mean, shocked, but also kind of not shocked because, you know, a company's got to grow a little bit before you hear of it, but I think HBO... I think the 80s and 90s. Yeah, I mean, I think that was there, you know, as we're going to lay out the boom time spoiler alert. Um, but yes, I think, you know, that is where their identity became incredibly well defined.

Was in the eighties. All right. So hit us with the, uh, their origin story. All right. We'll do a little backstory. It's not going to be super in depth. HBO started as an idea by Sterling Communications owner Chuck Dolan in 1969 when he was on vacation. He came up with this idea. So Chuck Dolan owned Sterling Communications, which was a company that actually laid the infrastructure for cable networks.

So they actually put down the cable. They put the cable in. The literal cable. Yes, and at the time in the early 70s it cost about 10, 000 a mile to put in cable. Wow. Which is a lot. Yeah. So it was really expensive and there wasn't a lot of cable in the United States at the time. Everything was open air. At this point in 1972 25 percent of America still couldn't get television signals at all.

Like, everything was open air at the point. So, if you lived next to a mountain, or if you lived in a deep urban center, and there were large, you know, things in the way, you couldn't get signal, no matter what you did. So, cable was the solution. Cable was a stable way to bring television to everybody. That was the advantage of cable.

It was connecting people and cable was set up in little pockets. There were cable stations. They paid the cost for the dish, which was really expensive. And they received the signals and then they distributed the signals. So HBO was a really cool idea. He came up with this idea. It was called the Green Channel back then.

That was his initial concept for it, and it was a way for him to recoup all of the cost of putting in the infrastructure for cable. You would charge somebody a nominal fee, which was like 5 a month on top of what they were paying for their cable to receive a special channel that showed the movies and sports.

And live events, but not just movies. It would show movies unedited without commercials. That was, was sort of a revolutionary concept. That was the big thing. Yes. No commercials, no commercials and unedited, right? Well, you're paying for the right. So it was like going to the theater in your home. That was the big sale home.

Box office. Home box office. So, Chuck Dolan sets everything up. He gets the movies from the studios. He gets some sports and he's finally ready to broadcast on the first night. First night. Yup. So, what do they do? You know, they celebrate. They're gonna throw a giant party, right? Of course. So, your first night, They pick a small town called Wilkes Bar in Pennsylvania.

Mm hmm. And they're, they throw this giant party there to celebrate their first night night. Mm hmm. And no one shows up. That's like a nightmare. Not even reporters showed up for this. Why? Well, there happened to be a little hurricane named Agnes going on at the time. So people not showing up to the party was not the worst thing to happen though.

No, no. So. Of course, there's a hurricane going on and what does it do? It blows the broadcast dish off the top of, of the cable station. So, so they don't even get to broadcast. Yeah, they're scrambling to get this thing fixed before they go on the air. You know, it's like a three, two, one, and they didn't have time to do it.

So they had to have people hold the dish in place. In order to make their first broadcast. That just sounds like a good story, like a Hollywood story. And you know how many people that broadcast went to? How many? 325. Hey, you got to start somewhere. All that trouble for 325 subscribers. So what did they broadcast?

Well, the very first film was sometimes a great notion. Starring Paul Newman and Henry Fonda. From the studio that gave you Airport. Now, sometimes a great notion. These are the Stampers of Oregon. Their motto, never give a inch. And they live it. Paul Newman. If you're making threats, I think you can make them plainer than that.

What kind of violence you got in mind? Henry Fonda. You haven't got the whisper of a clue what the hell this family's all about. Lee Remick. He seemed to give Hank what he wants, what he needs. He seemed satisfied. Are you? Michael Sarazin. The prodigal son returns. And that's me, right? Question is, why?

Richard Jekyll. We can use every last stamp or we can get a hold of him.

I've never heard of that. Me neither. And that has really good actors in it. Yes. Two good actors. Huh. One to check out. One, one to watch HBO's historical first film, premier broadcast from your broadcast during Hurricane Agnes in the middle of a hurricane with a dish held up by hand. I don't know if I believe that, but I do like duct tape and yeah.

I like that story though. I think it's, I think it's a really good story. I just picture like the few guys that are there in like their 70s tuxes with like a can of Olympia beer. Yes. And they hear a loud boom. And they rush up. They're like reticent to put their beer down so they can chug it. No, no, they bring it with them.

They chug it. No, no, they bring it with them. Oh. And then one guy even grabs like the, you know, like the 12 pack. Oh yes. To bring it up there. He knows. The one guy knows. They're in for a long haul. They are. Yeah. Yeah. That's, that's definitely what happened. Yeah. So when H B O launched in 1972, they looked at the Hollywood studios to see how many movies they were producing a year because they wanted to show newer movies on H B O.

Well, the studios were only doing about 82 a hundred movies a year. New, which only equaled to 200 hours of runtime or showtime. Yeah, roughly 200 hours. That's all they about that, of brand new content every year, unfortunately. HBO needed about 8700 hours. Ooh, that's a little shy. To fill an entire year's slate.

So, right away they knew movies are probably not going to be the only thing they can show. So they also looked to live events, to sports. Yeah, I mean, how many movies would that have been? 8700 hours. would be about 4300 movies. Yeah, that's a lot of movies. That's a lot of with no, that's no, yeah, no repeats, no repeats, which we know if you had HBO.

HBO made a lot of really smart decisions early on and one of them was to go just 2 years after launching to satellite transmission. Commercial satellites had just been approved and the first one had just been launched in space. So before that it was only for private government use? Yes, only government use.

RCA got together what they called SATCOM 2, which was the very second satellite, and they spent 7. 5 million dollars for six years. To be on that satellite. That was a big gamble for them at that time. They spent a lot and gambled really hard to be on the bleeding edge of technology. So what benefit would being on the satellite have for them?

Well, a satellite is a more direct beam than microwave. So it's offered even more stability than just being on cable. They would beam their content to the different cable stations. via microwave prior to this and now they have a satellite in space, so it was Very very smart, and it paid off one year later, so they launched into space in 1974 and in 1975 they had the Thrilla from Manila

Boxing match between Joe Frazier and Muhammad Ali in the Philippines. And they were able to beam that direct to their subscribers in real time. That had never happened before. Right, cause before they would record it and then they'd have to fly it back to wherever they were going to broadcast it from.

Right. Their decision one year earlier translated directly into subscribers for them. At the end of 1975. 300, 000 subscribers. Wow. Yeah. And this made everybody stand up and take notice of them because this was the first time this had ever happened technologically. And they had beaten all of the majors, ABC, NBC, CBS, all the people that carried sports and were the leaders in sports content.

The other thing that they did was that they sued the government. They sued the FCC to loosen regulations on installation of cable. HBO did? HBO did. And, they won! So What were they suing about? They were suing because FCC had all these, uh, regulations that made it very, very expensive to buy dishes, to install dishes, um, Oh, for separate little cable, local cables to set up.

Gotcha. And so these dishes, they only had a certain number available a year. Which limited the expansion possibilities. And they said, Hey, you guys are just getting in our way at this point. People want this. Right. So it was like over regulation. It was over regulation. Yeah. It was preventing innovation.

Absolutely. That's a really good way to put it. Well, it's a violation of the Sherman Antitrust Act, which I learned a lot about in the Paramount Decrees episode.

What? I learned a lot for that. Okay. I'm not going to, I'm going to, I'm going to name check it here. Okay. No, we did learn a lot about that. Yeah. Yeah. And so in 1977, this became known as the home box office decision. So they had their own. Yes, they did. They had their own decision, like the Paramount decree.

They had the home box office decision and this allowed cable systems to be installed much cheaper. And because of that, Okay. Cable systems exploded. Right. And so by the end of 1977 they had doubled again to six hundred thousand subscribers. So two years later Yeah from 300 to 600. Wow. Yeah in two years.

It's incredible. By the end of the 70s in 1979 Their subscribers had ballooned to four million Wow. And they were on at least one cable station in all 50 states in the United States. Wow. It almost doesn't sound impressive until you think about how little choices there were at the time. Yeah. I think that's one of the things that's most impressive is while this was happening, they were putting the infrastructure in for this as well.

You know, cable systems were being installed. It wasn't there. Those subscribers weren't waiting for this to happen, right? Technology had to evolve For it to happen to have access to infrastructure actually had to be put in for that technology Yeah, it's kind of like streaming. Yeah, very much like streaming how the Internet connections that we had when streaming started and wouldn't support it.

No but Very quickly they caught up because they saw the potential and you know innovators like Netflix who got in very very early Yeah, they started in 2007 was when they started streaming like HBO Mm hmm Pioneers Pioneers So the 70s were pretty good for HBO. Yes, the 70s were successful. But it's the 80s where everything changed.

Part 2

HBO

The Boom Years In the 1980s. HBO started having a much harder time getting movies from the studios because they started to see them as a real threat. Because of their alarming growth that they had had at the end of the 70s, the studios now thought, Hey, wait a minute. We're leaving cash on the table, just licensing these films for change to HBO.

At this point, HBO's whole motto was exclusivity and flat fees. Mm hmm. They would pay one price for a movie from the studio, and then they had to have exclusive rights to it. So it would cost more. They would be willing to pay more money for it. But, uh, they had to have exclusive rights because of the other...

Companies that were rising at the time. Right, so you had Showtime, and then the Movie Channel were out. So, in the early 80s, there started to be a lot of repeats on HBO. There was even an article in the New York Daily Times, where a reporter said, Show me a home box office patron. And I'll show you someone who has seen the Great Santini 15 times.

That's funny. Yeah, so in 1981, if you subscribed to HBO, Showtime, and the Movie Channel, you would have had the option to have seen Rocky II, 44 times. Superman. 53 times. I mean, I don't think there's anything wrong with that. I probably would have sat through Superman 53 times. The Muppet Movie, 37 times.

Close Encounters, 41 times. And Justice for All, 39 times. And The Rose, 38 times. Or, to make it simpler, You could have seen six movies, 252 times.

That's a lot of repeats, guys. It is. Yeah. That's a lot. You know, even if they are your favorite films. I remember as a kid being, you would get the, you know, they had the HBO guide. Oh yeah. You would get the guide and you could watch the same movie three times in a day. It would play in the morning, in the afternoon, and at night.

Um, unless it was rated R and then it would have to, they would only play it after 8 p. m. So. He says with a smile. But that's why I saw like Beastmaster so many times. Yeah. When I was a kid. And it's also funny too, um, at this point the studios were kind of dumping their b and c films, the ones that weren't performing at the box office mm-hmm.

on them because they, you know, they, they needed content and so it was a, a studio major, so they put it on mm-hmm. . Um, so you got, as a kid, I got this kind of, Twisted vision of what was successful and what wasn't. Right, what were the big films. Yeah, what were big films. Yeah. Cause like I said, Beastmaster, I probably saw a hundred times as a kid.

Yeah. Because it was always on HBO. Um, but that movie was not a success at the box office. Yeah, I gotta say, that happened to me in the 90s. I probably saw Short Circuit 2. Yes. A thousand times. And every time I would come on, I'd always wish that it was short circuit one, like the first one, but it'd be the science to watch it anyways, because what are you going to do?

Yeah, it's Johnny Five and he's alive. That and Weekend at Bernie's. Although I loved when it was Weekend at Bernie's too. It seemed like the sequels were always on more than the originals. I don't know if that was just my... Yeah, because back then sequels didn't do as well as, as the first movies. So they would get the sequels more than, yeah.

So anyways. This concept of HBO being a threat to Hollywood went all the way to Wall Street. So in 1981, Goldman Sachs summed up the studio's fears. They said that movies and theaters and on commercial TV would become less desirable because they don't have commercials and they would, right, they don't have commercial and unedited and you don't have to leave your house.

So, yeah, which is very similar to the same fears that people had in just recently in 2020 when we couldn't go to the movies and streaming got really big and all that those big movies were being dumped to streaming, right? And people said, Theatrical is dead. Yeah, no one will ever go back to the theaters now.

Mm hmm. Cut to. Cut to this summer. 2023. Yeah. Biggest summer pre, since before the pandemic. I know, and we don't have to complain about this. We've complained about it before. I mean, really, it's not even a complaint. It's just... Well, people want to go to the theater. Yeah, they do. You know, like, no matter how many times people have proclaimed that theater is dead, it's never dead.

No. They, they try to proclaim that about the actual theater when movies came around. And guess what? That's true. The actual theater is still going. Still going. People go. It's, it's very awesome. People love that experience. So. So. So. So. So. So. So. So. So. So. So. So. So. So. So. So. So. So.

So. So. So. Turn off the ringer. So, what do you think the studios did? I know what they did. This is what the studios always do. They try to band together. Hey, we can do that. Yeah, put them out of business. We can do that. We're gonna put them out of business. Hey, remember Epics? Remember, epics Paramount, m g M and Lionsgate are coming together to bring you a big new experience.

The movies you love will never change, trust me. But how you watch them is about to. This is Epics big movies, big events, big exclusives. You won't see anywhere else except wherever you go. Because Epyx is more than just a big new movie channel. It's an all access experience. Hallelujah! Welcome to Epyx.

It's still around, I think. Is it? I think so. Somewhere. So... They band together. The studios all banded together to form their own cable superstation. That they called premier. It's a good name. Yeah premier Fox Universal Paramount, Columbia and Getty oil It's a big five. That's big five folks. That's a big five.

That's a big five But guess what wait Getty oil what yeah, Getty oil they put into what it's just like as a investment I guess, I don't know, I mean, you know, Charlie Bluthorn You got movies? You got oil. Like what? Like what? Charlie Bluthorn was friends with, you know, all the oil guys, so he was probably like...

You got oil? Gulf and Western. Well, it actually was. With Paramount, it was still Gulf and Western at the time. Yeah, that's probably why, actually. You got bumpers? You got oil! And now you got a super cable station. The FCC said, no, I don't think so. Because of the Sherman. That's a violation of the antitrust act.

Yeah, it is. That's too many coming together so that it. Prevents competition in the market. Yes, that's why yeah, and they were you know, They were literally trying to put them out of business Yeah, that was that was the point of this conglomeration was to put them out of business They're like hbo is too big.

We gotta kill these guys see and this is when the government does good work when they regulate Because that is great. I mean, they would have probably put them out of business because they would have held all the stuff. They have all the movies, right? So all the movies, I mean, look, epics that put everybody out of business like themselves.

So of course this. Backfired on them big time because all of these studios were holding back their movies right as they're trying because they're gonna put them on premiere Yeah, you want to see the premiere of this movie? It feels like hey, yeah, you you'll get any new movies We can take some new movies.

I said nah put them on premiere. Yep. It's what happened But when FCC said no, no, no, no, then they had like this whole backlog of films And it created a feeding frenzy because, Hey, you want some movies? You want movies? We got movies. Remember when you said we, you, you wanted movies. Well, we, we got some movies.

So Fox was saying that Paramount saying it. Everybody's like, Oh, Hey, HBO. Hey, try to call them back because they want to cash in on these films. Buyers market. So this is interesting. Good. I've been waiting for something interesting to happen tonight. Well, uh, this is a quote from that book, Inside HBO, that I mentioned earlier by George Mayer.

Uh, Movie studios see movies as a perishable commodity. The older it gets, the less appealing it gets to the public until it gets very old. Then it may become a classic or a cult film and regain its value. And this is the... Thought process behind The fire sale that they were having with all these films that they had on backlog at that point, right?

They were like, oh man, these are starting to get moldy. We gotta get them out there Or no one's gonna want to watch them Why do you sound like why do you sound like oscar the grouch do is that who they sound like I don't know I don't know who that is actually Yeah, uh, it's like a new york guy, I don't know you really generic new york guy It is really probably offensive new york guy.

Yeah. Sorry new york in 30 years. You won't be able to do that anymore I'm, probably not supposed to be doing it right now Well, they like make fun of our accents in L. A. anyways. With the, like, the freeways. It's true. So, we can dish it and we can take it. So, back to HBO. Oh yeah, that's what we keep talking about.

We're talking about HBO. Uh, so, Is she snoring? No, I think I heard a coyote. No, she's snoring. Yeah, she is snoring. I can hear her through your microphone. Hey! Yo! You! You! Dog! Dog!

So, at this time, the way that movies were released was theatrical, cable, and then home video. Because home video was a pretty new market. Yeah, it was a very small market at that point. But that all changed when 9to5 came out. In 1980. Working 9 to 5 What a way to make me get him by The first day I got here, and I put up with all your pinching and staring and chasing me around the desk cause I need this job, but this is the last straw!

Fox, who released the film, hated HBO. So they decided, you know what? Screw you. We're going to go theatrical home video. And they did that eight weeks after the theatrical window, so bypassing cable altogether, which ended up actually changing. The model because it did so well on home video. It did so well.

So studios were like, hey, we could Make a little bit more money here before we dump it and get pennies So after that it became theatrical home video and then cable which is still what it is today. Yeah All things to nine to five. 1981 also was a banner year for them because it is the first time that HBO became the most profitable part of its parent company, Time Inc.

Prior to that, it was all their other assets, but in 1981, they became the big dog. This is a kind of the reason why all the studios didn't like HBO at the time. They didn't like their mentality. They called them arrogant. Come on. That's not what they didn't like. They didn't like that they were making money off of their stuff.

It's true. And that they didn't have control over it. Exactly. But here's what they, here's the spin in the newspaper. Yeah, this is a quote. They're talking about cable churn, right? The people that Get the service and then turn it off after a month or two. Yeah, I don't know if we talked about that earlier, but churning...

Did we say churn? We didn't. No, we didn't, but churning is the turnover of subscribers. So every month you'll have new subscribers, but you also have some that drop off, and then new subscribers, and then drop off. So that, they call that churning, and they actually coined that in the cable age. Yeah, and they still use it in streamer age, yep.

They're talking about churn in this with that kind of customer rejection any other business would have been opening a vein yet The cable people really believed that they would just keep on selling more customers because the number of potential subscribers Was limitless as long as new franchises were being granted and more cable systems were being built Sound like something that yeah now that sounds a lot like some of the streamers Today.

Yeah, really does because they're constantly opening a new markets and it's not they haven't cable systems It's new markets. Yeah new countries that they enter into and there will eventually be a saturation point Well, or they call it much duration. Yeah maturation maturation. Yeah a maturing of the industry It's you know limitless.

It's limitless. Well, it's only limitless until you hit saturation And that will happen eventually. Everybody that's going to have, you're never going to have 100%. There's no point. And I think this is where the breakdown in this kind of mentality is. There's no point ever that you will be at a hundred percent saturation.

There's no way that you will sell your service, no matter what it is. To every person on the planet. It just won't happen. But as long as all those people are there, there's the possibility that it could. Yeah. That's the positive spin. Yeah. That's the positive spin. You know, you're any, anybody's lucky to even hit 10%.

At this point in 1982, HBO was at 60 percent of all subscribers on cable. So 60 percent of people who had cable had HBO at HBO. That's pretty darn good. Yeah, pretty good. Especially since we're talking about saturation. 60%. That's a lot. That's a lot. So with HBO at 60% The studios were complaining about their pay structure, much like the writers and actors are right now in Hollywood, with the streamers.

The studios very much wanted to break HBO's demands for exclusivity and flat price offers for movies. They wanted to get paid on a per subscriber basis, something that HBO continued to balk at. So, by 1983, the tensions with the studios have gotten... It was really hard for them to shake movies loose from the studios.

They were asking exorbitant amounts of money for them. So, HBO decided, Hey, look, we're not getting enough content from the studios anymore. We need to get into producing our own, much like a lot of the streamers did. Once the studios were reluctant. Yeah, that's exactly what happened with Netflix, because when their contracts with the different studios started to run out and the studios said, Oh, we're not going to let you have this stuff.

Cause they saw. How dirt cheap they were giving stuff away and how popular Netflix was, right? The same thing happened. So they started looking for original content and, and actually in their defense, it's pretty much the only option at that point when you can't get content from the people that were supplying it from, you got to make it, you got to make it yourself.

So HBO started looking around for struggling studios, cash, poor studios, and they found Orion pictures. So Orion.

For 10 million, let them buy a piece. And they guaranteed all of their output would go to HBO afterward. So that was one solution, but being the forward thinkers that they were at the time, HBO said, you know what, let's form our own studio too. So they joined with Columbia and CBS. To form Tristar Pictures, which I know has a special place in your heart.

Oh my gosh, Tristar. You love the Tristar logo so much. I do, I do love that. It's the best.

I just love the pegasus. It's a freaking pegasus. Look at it.

It's so good. It is. It's one of my favorites too. I love that one. It's such a good logo. I mean, I almost feel like we should do a Top 10 like, Logos. Because that's one thing we do when we're watching movies. Anytime. Whatever comes on we try to call the logo first. Yes. Yes. And we're like, oh, I've never seen that one when there's a new one.

I've always loved that one and We were going to see the walk in 3d and you went to run to the bathroom before it started and the logo came on and it was in eight like It was in 3d and It wasn't on VHS. It was like clear and beautiful and I swear I almost got kind of misty eyed and when you got back, I was like, almost did the TriStar logo with the Pegasus.

She got a little misty eyed. I just love it. I don't know. I don't know why. You know, little girls like horses. Yeah. And Pegasus or it was on Labyrinth. Yeah, it was on Short Circuit. Short Circuit. Yeah, I know it was on a lot of those. Yeah. Anyways, total digress. Nerd out on the logo. I love that logo. You didn't tell me that.

Yeah. Tristar pictures. That's awesome. Tristar pictures. You want Pegasus's? You want horses with wings? We got horses with wings and bumpers. And oil. They didn't have bumpers. No, no, no horse bumpers. All right, anyway, so back to HBO.

So they had, um, they now had Tristar. They had Orion, um, but they also formed their own production company. So Orion was a studio that they had bought into, and Tristar was a studio that they co owned, um, but they started their own production company too. Uh, it was called Silver Screen Partners, which later became HBO Pictures, which I know you've seen on a million things also, um, and they raised a hundred million in equity to make their own films.

So their, their aim was to make kind of. Lower budget films. Um, so for like a hundred million, I think they were aiming at like ten films. Yeah. To, to produce. Um, and they could be things that they, uh, started to release every month. They were called HBO Originals. But that's not all they did. So, they started doing this thing called pre buying.

Where they would go in to a movie, an independent movie that was being produced, and put in up to fifty percent of the movie's budget, and they would produce the movies. Instead of a studio coming in and putting up the other money, you know, the other part of the money for the independent film. So they were pre buying it because they were also, in addition to theatrical that they had a cut of, they were getting exclusivity on HBO after the movie.

They were also tying up video rights. Yeah, and... Directly taking money out of studios pockets. Yeah, this was the one that really upsets studios more than any of the others. Mm hmm. Uh, having a little piece of that, that's not a big deal. But these are people that would have gone to the studios and given them their features and begged them for their money.

Mm hmm. And now HBO is doing that instead. Mm hmm. But the pre buying wasn't always successful. What do we got? Hit me, hit me with one. The first Deadly Sin, 1980. Never heard of it. Faye Dunaway and Frank Sinatra, you ever heard of that one? Never heard of it. Yeah, never heard of that one either. The Legend of the Lone Ranger.

Yes, I have heard of that one. I know you've heard of that one. I actually dearly love that film. But that was not a successful film. Those two films cost about three and a half million and they didn't recoup the money. But for every failure, There was a success. Well, that's good news. Yeah. Hit us with a few of those.

A few successes. Uh, Sophie's Choice. Oh, I've heard of that one. Academy Award winner. Academy Award winner. Yeah. Sound familiar? First Blood. Oh, Sylvester Stallone? Yeah. They pay for John Rambo? Yeah. What? I know. That's crazy. I'd never, I didn't know that. I didn't know that. I had no clue. But wait, there's more.

What? King of Comedy. Oh my gosh, that's one of my favorite Scorsese films. Is it? I think it's a really underrated film. How about Pope of Greenwich Village? Oh. They took my toast, Charlie! CHARLIE! THEY TOOK MY TOAST!

Yeah, they put in seven and a half million dollars on that one. They went in deep for that one. Yeah, they did. And then the other one was The Three Amigos. I'm Lucky Day. I'm Dusty Barnum, so together we're

The Three Amigos! They were able to mitigate costs by selling the films theatrically in other countries and selling off both the TV and video rights in other countries. Wow. So they were basically getting it for free by selling off all of these other aspects of the film. You see where they're going with this.

Smart move, guys. They also saw the emerging market of VHS. VHS boomed in the mid, well, early mid 80s. But that's a competitor with them, isn't it? Well, they didn't see it as a competitor. They saw it as another revenue stream, which was very smart of them. You said revenue scream today. I'm pretty sure you did.

Okay. Well, I'll say it again. They didn't see it as a competitor They saw it as another revenue stream. So were they using it for their original content? So they Were looking around for an existing company so that it had the infrastructure for replication and distribution already in place So they Thorne EMI like the streamers at this point.

They had grown so large that they were producing more films a year than any of the majors or all of the majors actually put together. Just like Netflix or Amazon. Mm hmm. Those guys do the same right now. Yeah. And they had completely vertically integrated. They were the producer, the distributor, and the exhibitor at this point.

By the end of 6 million subscribers. Wow. In 15 years from 300. To 14 million. 14. 6 million. That's crazy. And that's just domestic, right? Only domestic at this point. But the rise of VHS and other cable channels like Showtime, gaining steam and the slowing of cable expansion, also known as maturing. In 1985, HBO laid off several hundred employees.

The warning signs were there, but the businessmen failed to see them and they went on like business as usual. So they laid off people in reaction to VHS becoming really popular. Well, it was a bunch of things. It wasn't just VHS. It was the expansion of cable. The markets that they were expanding into started to dry up.

They started going to urban centers and it costs more to do it there. So cable companies were just saying, screw it. I'm not going to go in there anymore. Uh, it's just too expensive. So to offset their losses, they started laying people off. I wonder if that's what was happening in. Was it 2022 with Netflix?

Remember in the spring they laid off a whole bunch of people. Yeah. It's the first time we'd ever heard of layoffs happening at Netflix. Yeah, I think very similar things were happening there. Because their, Their expansion kind of started to end too. Like they, I mean they're still expanding, but maybe it's not, But it was slowing is what, yeah, because so was, Starting to mature.

HBO was also still expanding at this, but instead of millions of subscribers it was, You know, 100, 000 subscribers a month instead. They're also cutting their original content spend at Netflix. Right now, in 2023, they're estimating it's going to be about 26 billion dollars that they would have spent on original content.

Wow, that's a lot. Yeah, and next year they've already slashed up and they're predicting it'll be closer to 17. Billion, which is still, that's still an incredible amount of money, but, uh, that is a major cut though. Yeah. Yeah. Billions. Yeah. I'm going to get back to HBO. Yeah. Get back to him. I'm just trying to, you know, relate to the kids.

Yeah. You know, uh, it's what you told me to do. Yeah, by the end of the decade, 1989, Warner merged with Time Inc. becoming the controlling entity of HBO. This is the first time that HBO had changed hands. Because Time Inc. had basically owned them since Chuck Dolan was laying cable back in the day. And so, this was the first change that they actually went through.

But it's not a bad change for them. No, because... What laid ahead were the most prestigious

years for HBO?

Part 3, HBO The Prestige Years. Alright. The 90s. HBO's entering the 90s. Mhm. Right off the bat, the first thing they did was introduce a new technological advancement called multiplexing. Multiplexing was offering more channels for the same price. So they introduced HBO, uh, two and three. At the same time.

So you paid for HBO and you got three channels instead of just one. That's a lot more content you got to put on there too. Well, yeah, I mean, you can do the same content in a different order. It wasn't like they were, they weren't specializing them like they did later. Uh, later on they offered like, you know, eight, 10 channels or something like that.

Yeah. And it was called the, uh, HBO family of channels. It was a selling point. You're not getting one HBO, you're getting three. You're getting more. You know? For the same price. And then when they raised it a dollar or two, and it was like, well, you know, it's still, you know, we're getting all these channels, all these channels, you divide the channels by the costs, you know, and then another thing that they did was they went digital, they didn't do this by themselves, Showtime and the movie channel all became some of the very first channels offered digitally.

But it wasn't the technology that really made HBO in the 90s. No, it was the original content. Remember Tales from the Crypt?

Oh, I remember Tales from the Crypt. That was one of my absolute favorite shows. Hey mom, I stayed up late and would go turn on HBO so I could watch Tales from the Crypt. Came on at like 10 o'clock. Never missed an episode. I love that show. It's so great. So not allowed to watch it. So they did Tales from the Crypt.

They also did a show called Dream On. Dream On was very popular. I've never seen but I know you. I did yeah. You I watched it. But, the show that really changed everything for them was the Larry Sanders Show. This television show is where you are in total command. Where you are the king. God, my ass looks fat in these pants.

Oddly, this show oddly is liked by sex life, in that it lasts about an hour, there's a pause, and I'm usually interrupted by Hank.

What really changed was the prestige that they got from that show. That show won Emmys. That show won Golden Globes and Peabody Awards. In a way, that's like the streamers now winning Oscars for films. It's a way of legitimizing you and saying, hey, your original content is not just filler, it's actually good.

Right. And not just good. It's great. It's the best. It's the best of the year. Yes. Of just, just this year. It's also a way that Hollywood has accepted them too, at that point. Mm hmm. If you're getting awards from your peers then you know that you've been accepted by Hollywood. Yep, but what really changed was the ad campaign that they had in 1996.

I don't know. Where do you think it goes? It's that way. Come on. Let's follow it. Cool.

We have a problem. What happened to Larry Sanders? Roger, there must be a couple of gremlins HBO.

They spent 60 million dollars on that campaign. And people stood up and noticed. In 1999. That's also when things really changed, because that's when The Sopranos was released. Could The Sopranos family business be taking its final hit? Final indictments? Are you sure about this? Are we going to land now it's open season?

Oh, you better give me your jewelry. I'm not giving you my engagement ring. This isn't stolen, is it? Is it Anthony? Those indictments? His father could take it in stride, but he can't. Anthony Soprano, we have a search warrant. The Sopranos. That show was nominated for 111 Emmy Awards. And it won 21, right? It won 21.

Yeah, that show was special. And that is the show that defined HBO as a prestige place to go. If you were seeking out good television, the best television, you went to HBO. Yeah, well, I think that's the thing about HBO is it became a status symbol. I mean, if you're driving around and you see a motel sign, it says, Air conditioning, color TV, HBO.

It did. You're right. Yeah. Yeah. It was like an amenity. Yeah. You know, you're going on vacation somewhere and you're like, Oh, I hope the rental has HBO. Yeah. Especially if you're stuck at a cabin somewhere or you're like. Or at the beach. Can I get HBO here? Is it HBO? Yeah. My dad always called it home box.

Still calls it home box. So this started a long run of Prestige programming, the Sopranos after Sopranos you had from the earth and moon You had Sex and the City, you had Six Feet Under, you had The Wire, newer ones like True Detective, Veep, and this all kind of culminated with Game of Thrones. This was like their pinned ultimate moment.

In 2015, it set the single year record for the most wins for a single program, 12 Emmys. In 2007, HBO had a subscriber base of 29 million. Wow. Wow. Twenty nine million. Yeah. Unfortunately, the prestige years sorta started coming to an end. At least, they've been paused. Yes, it hasn't been precipitous. There's a word, but yeah, everything you can say after 2015 is kind of been downhill for HBO.

Part four, HBO, the identity problem. So after the highs of 2015. Winning all those Emmys the prestige. Mm hmm AT& T merged with WarnerMedia And right away, HBO was in trouble. John Stanky, the new CEO. What, what's wrong? His name is Stanky. Sorry, I'm a child. John Stanky, the new CEO of Warner Media targeted HBO as not being profitable enough.

He said they needed to move beyond the 30 to 40 percent penetration to become a more common product. Like, you're lucky to be 35 or 40%. We are now. I wonder if maybe he was looking at that 60 percent that they once had. Well, yeah. Early on, they had 60 percent of all subscribers. Yeah, I know, but I, you wonder looking at, you know?

But I'm just saying, like, at 35 or 40 percent penetration into any market, Yeah. You're, like, HBO is now, like, synonymous with cable. So it's like, Oh, you have cable, you have HBO, right? You know, this is where HBO is current identity problem started. HBO go existed as an app based platform for people with cable.

I remember that. HBO now existed for people that already cut the cord. That was us. That was us. We had subscribed. Yep. Those were replaced by HBO Max. And that was to clear up confusion between the two. Are you, are you guys clear? I wasn't confused though. I mean, I was initially downloading the app. Yeah.

Which one do I get? Yes, because there were three of them. Well, no, there were two. Two, back then. Yeah. But then, all three of them existed for over a year. So there were three HBOs out there, and nobody knew which one was the right one. The other thing that Stanky did was, he... Sorry. He informed them that HBO was no longer in the boxing game.

The sport that put them on the map in 1975 with the Thrilla from Manila was no longer a part of their, their game plan. You know what's crazy? I didn't even know that they 45 years, Charlotte. I didn't know that they didn't have boxing anymore. They do not, so. That's crazy. Yeah. Okay, this is the thing. He wanted to make them conform more to what Netflix was doing because Netflix was the number one Streamer and he wanted atpo to be the number one streamer.

So he wanted them to produce more short content He got rid of the the live stuff that they were doing Um, this is when they also like the comedy and stuff Yeah, this is also when they got out of a lot of the comedy they produced far less of that than they used That's about the same time. I think that netflix started doing that correct.

That's insane So HBO's loss, Netflix's major gain on that one. I can't believe they don't do boxing anymore. You just blew my mind. Blew your mind. Yeah, this restructuring laid off 150 people at HBO, and then Warner merged with Discovery in 2021. And that brings us to where we are currently. You know, HBO is still very successful.

Globally, they have about 80 million subscribers, but they're sitting at number six streamer in the world right now. Um, you know, top dog is Netflix. Second is Amazon, then Disney, and then four and five are things that are only available in China, Tencent, um, and Thailand. So to sum it all up, these various mergers seem to have watered down the value of what was once the golden goose, right?

They printed money, basically. They made their own movies. They won Oscars with Sophie's Choice. You know, in fact, they just had their identity removed from the app that provides it in May of 2023. H B O Max just became Max. Yeah, they stripped away the name that once signified quality. So from the app. In addition, they've done many controversial moves lately, like removing H B O shows from the app in order to put.

More reality based discovery content on there as a cost cutting move. They've removed a bunch of these things and this is probably the most egregious one. This just happened a few months ago. They signed a deal with their number one competitor, Netflix to air their exclusive television shows. We've said that.

We bet that Netflix is going to eventually license their content out to other people. That that'll be a way that they'll try to make additional money. Unless they make some moves, you know. But, you know, that's 10 years down the line for them. Yeah, I mean, that's years down the line. That's years down the line.

But yeah, so they stole all of HBO's subscribers to form the app. So they had this streaming. They based this all on HBO's following. And then they took HBO's name off of it, and now HBO only exists as a tab on the app that doesn't even bear its name. That's the saddest thing about this. Yeah. HBO built that, Goodwill.

HBO built all those subscribers. It was HBO was the foundation of that app. And now, they're just a tab.

Well, thanks for joining us on this depressing episode of Perf Damage. Adam's brought the mood way down. Hey. I'm not trying to bring the mood down. He's on a soap box again. Oh, I'm always on a soap box. I know. Uh, this is a cautionary tale, right? They don't have to go down this path. They can change. They can look at these signals.

So, you think that Netflix is in the prestige. Yeah, I think they're in the prestige years right now. And they're teetering on the edge of the Yeah, I think, I think they're still peaking, you know, like they're just starting to see all the, uh, the cracks in their, their formula. The maturation has just begun.

History always repeats itself. It does.

Well, thanks for joining us on this edition of Perf Damage, all about the history of HBO and how eerily similar it is to some of the streamers out there. We've said Netflix a lot, but there's others. They're just the biggest. We just use them as an example. Yeah And you know, I think their story probably follows closest because they're the biggest Yeah, it'll be interesting to see what happens in the next 10 years with streaming.

I mean just In general with the, the whole industry because it's not a viable thing as it is now. I mean, I think maybe we're going to see more ads come out. We're going to see more tiered pricing. Or we're going to see people just dip out altogether. Yeah, I think that'll happen. Well, you know, everybody opened their own streaming platform and you know, no one wants to go, Oh, what was that on?

I don't know. What did we watch that on? Yeah. Again? Was it this one? This one? This one? I can't remember. Nope. Makes it harder. It'll just all be Pluto TV one day. Anyways, thanks for joining us on Perf Damage. If you want to get a hold of us, the contact info is all in the show notes. Tell us your thoughts on HBO in this thing.

Because we'd like to talk back to you. Yeah. Or if you had movies that you watched on HBO or if you love the TriStar logo like I do. Oh, yeah, what's your favorite logo? We have so many. Oh, man, we love logos. Yeah, I know. We might have to do a little spotlight on some logos. Yeah, we should do just a short one on that.

Until next time, thanks for joining us here on perf damage.

Wall street knows it's a big joke everywhere else. Everybody knows that HBO is, is really hot commodity. The studios are jealous about how cash rich they are. They're like, Hey, we went, we went, they were like, wait a minute. Let me fix this.

Better not be your stupid outtake. That's a good outtake. Blah, blah, blah, blah, blah, blah.