Hard Knocks: Why HBO Is Having a Rough Transition from Auteur TV to Big-Time Streaming

When HBO signed Bill Simmons, a former ESPN columnist and commentator, in July 2015 to a $20 million, three year-deal to create and host a weekly sports/culture talk show, the network hoped he would provide a burst of must-watch programming for its recently launched HBO Now streaming service.

Instead, Any Given Wednesday with Bill Simmons endured jeers in the sports and TV press — including in the Los Angeles Times, Sporting News, Washington Post, and here in Decider — as being little more than a televised radio show. HBO’s recent decision to end the show after only four months on the air is the latest in a wave of false starts, shutdowns and cancellations at the network that has decimated its primetime schedule and prompted many A-list producers to take their new shows to streaming rival Netflix.

Any Given Wednesday failed to catch on with viewers. On a network where Real Time With Bill Maher averages 1.7 million viewers and Last Week Tonight with John Oliver averages 1.3 million, Any Given Wednesday averaged only 318,000. The episode that aired on October 26 only drew 82,000 live viewers, and that proved to be the last straw.

The talk show had been scheduled for three additional episodes this year and 37 more in 2017. HBO said Simmons will stay and the network and continue to develop sports-related programming.

HBO has Emmy gold and social-media buzz for Game of Thrones, Veep and Silicon Valley, and will contend next year in limited series with The Night Of, but the development pipeline has become a graveyard for original dramas, comedies and limited series over the last two years with HBO passing on most of its pilots, shutting down several shows while they were in production, and cancelling two shows — 1970s rock drama Vinyl and dark comedy The Brink — months after renewing them.

At the same time, Netflix and Amazon have been leapfrogging each other to make mega-deals for A-list drama series, Oscar-contending films, Sundance indies, docuseries, reality formats and more. Earlier this month, Amazon nabbed David O. Russell’s mafia crime series starring Academy Award winners Julianne Moore for 16 episodes over two seasons in a $160 million deal, and Netflix premiered its lavish royals drama The Crown to overwhelmingly positive reviews and an early jump on this year’s Golden Globes. Netflix and Amazon both have Oscar contenders in multiple categories.

Nearly every major producer whose shows have fallen through at HBO over the last two years have taken their new shows to other networks. In 2015, HBO passed on a drama pilot from Orange Is the New Black creator Jenji Kohan and shut down production on two new shows from House of Cards creator David Fincher. The mega-producers who made Netflix’s first two hits have both sold new shows to Netflix that are in production and will premiere in 2017. Only one show that HBO greenlit in 2014 — the football comedy Ballers — has aired a second season.

Decider takes a look at where HBO went off the tracks, how Netflix has been a direct beneficiary and what the new stakes are now that Netflix, Amazon and other streaming services are competing with HBO for talent, subscribers and awards and — in an uncomfortably high number of cases for HBO — winning.

Taking on Netflix

Jeff Bewkes, the CEO of HBO’s parent company Time Warner, said earlier this year that HBO would ramp up its original programming to 600 hours a year. That’s the same number of hours Netflix has said it would program for 2016, and Bewkes was signaling to Wall Street that HBO would continue to be a major competitor in the premium-cable business. (The financial site Marketwatch took the bait, titling its story “HBO plans to match Netflix’s 600 hours of original programming.”)

Bewkes said in Time Warner’s first earnings call with Wall Street analysts since the announced merger with AT&T that the merger would help accelerate growth for the HBO NOW streaming service, which is launching soon in Spain, Brazil and Argentina. “These are just early examples of the kinds of vibrant new services and capabilities we’re working on,” Bewkes said, “and we plan to accelerate these as part of AT&T.”

Time Warner does not break out its total number of U.S. subscribers for HBO, but an SNL Kagan report last year estimated 31.4 million. Add in the 2.7 million that HBO reported adding in 2015, and that works out to HBO having roughly 34 million U.S. subscribers. That puts HBO ahead of Starz (24 million) and Showtime (23 million) but well behind Netflix (46.5 million) and Amazon Prime (43 million). All five services have big-budget, big-name shows, all are ramping up their slates of scripted originals — and all are $4 to $6 a month cheaper than HBO.

Only 1 million of HBO’s 34 million subscribers are from the freestanding HBO NOW streaming service that the network launched in April 2015. The overwhelming majority subscribe through bundled TV services like Comcast, Charter and Dish Network who, collectively, have maxed out their penetration of U.S. households and are now losing about 1 percent of those customers a year.

That shrinking base of bundled TV subscribers explains why HBO wants to negotiate better terms with those bundled TV providers, but the bigger risk that those subscribers who are currently paying for HBO will cut the cord — including HBO — and never come back. HBO is boxed in on one side by a declining base of bundled TV subscribers and on the other by a too-high $15-a-month subscription rate that is inhibiting its growth vs. less expensive services with comparable or better content offerings.

From 2011 to 2015, the average Netflix household’s daily watch time doubled. Now, those households watch TWO HOURS of Netflix programming every day.

The competition is for viewers’ time. The more minutes you watch on one service, the fewer you’re watching on another and the less likely you are to subscribe to another. According to data compiled last year by REDEF’s Matthew Ball, the average Netflix household’s daily watch time doubled from 2011 to 2015 to two hours of Netflix programming every day. Netflix households also watch twice as much Netflix content as HBO households do HBO content — and at $10 a month vs. HBO for $15 a month.

One reason Netflix viewers watch so much more content is that there’s so much more to watch on Netflix and more coming every month. HBO’s four original drama series for 2016 — Vinyl, Game of Thrones, The Night Of and Westworld — will generate 38 hours of programming. Netflix’s eight drama series for 2016 — House of Cards, Marvel’s Daredevil, Bloodline, Orange Is the New Black, Stranger Things, The Get Down, Marvel’s Luke Cage and The Crown — will generate 158 hours of programming. That’s four times the hours, buzz, review attention and retweets and does not include original foreign-language series like Marcella, Marseilles and the very popular Narcos.

Not Getting to Yes

In September 2015, HBO dominated the Emmy Awards with wins for drama series (Game of Thrones), comedy series (Veep), limited series (Olive Kitteridge), documentary series (The Jinx) and documentary film (Going Clear), and won more Emmys overall than the next five networks combined. HBO’s 43 awards was the most thorough domination of the Emmy Awards ever by a single network.

That impressive haul, though, masked a series of unfortunate events over the preceding months that had decimated HBO’s planned lineup for the following year:

• In March, HBO shot a pilot for The Devil You Know, a drama series about the Salem witch trials co-written by Jenji Kohan and directed by Gus Van Sant, that did not go forward. Kohan moved on to a dramedy series for Netflix about ladies wrestling called G.L.O.W., and Van Sant is directing a limited series for ABC about the LGBT movement called When We Rise.
• In May, HBO passed on Mike White’s Mamma Dallas comedy pilot about conservative Texas family who unwittingly hires a drag queen to be their live-in nanny. White moved on to showrun Nickelodeon’s School of Rock series that’s now in its second season.
• In June, HBO shut down David Fincher’s Videosynchrazy comedy series about music video production in the early 1980s midway through production. HBO also premiered Season 2 of its much loved, much discussed crime anthology series True Detective to middling reviews and military farce The Brink to critical savagery. Both shows bled viewers and endured more critical snickering over the course of their respective seasons. Fincher is now executive producing and directing multiple episode of FBI thriller Mindhunter for Netflix.
• In July, HBO signed Bill Simmons, the former ESPN sportscaster, to host a sports talk show — Any Given Wednesday — that the network cancelled after four months of abysmal ratings. (Simmons is staying at the network.)
• In August, HBO pulled the plug on David Fincher’s Utopia drama series, which was in rehearsals and about to begin production, over a budget that was heading north of $100 million and halted production on its six-part Lewis & Clark limited series. Utopia is apparently dead. Masters of Sex showrunner Michelle Ashford is rewriting Lewis & Clark, though it’s not clear whether the series will ever go forward.

HBO’s record Emmy haul in September 2015 didn’t fix those problems, though it put a temporary shine on the parts of the machine that were continuing to work well. The honeymoon would be short. When HBO announced the hire of film producer Nora Skinner as a senior executive for drama series in October 2015, an anonymous commenter on Deadline responded: “They have like three dramas on the air. How many executives do you need for that?”

In a media environment where Netflix and Amazon were building giant series slates from scratch and already into the second and third seasons on many of those shows, HBO was falling behind and Hollywood was noticing.

And the worst wasn’t over yet. In the months immediately after the 2015 Emmys, HBO’s content well for 2016 and even into 2017 began running dangerously dry:

• In October, three months after renewing freshman dark comedy The Brink starring Jack Black and Tim Robbins, HBO rescinded the Season 2 order and cancelled the series without further comment.
• In January 2016, Variety reported that Westworld, HBO’s $100 million sci-fi/western, was shutting down production for a few months to give creators Jonathan Nolan and Lisa Joy additional time to write the final four episodes of the 10-episode first season. The series, which was ordered to pilot in 2013, still had no announced premiere date.
• A week after Variety’s Westworld story, HBO shut down comedy series Brothers in Atlanta that was already midway through production of its first season. Lorne Michaels was producing the series with creators Diallo Riddle and Bashir Salahuddin, two former Late Night with Jimmy Fallon writers, who had shot a pilot for HBO in 2013 that didn’t go forward. HBO didn’t say why it halted the series, but the similar subject to FX’s then-forthcoming Atlanta — also a naturalistic dramedy about young entertainers in hip-hop Atlanta — and Atlanta‘s sky-high buzz likely influenced the decision.
• In February, Kim Masters of the Hollywood Reporter reported that HBO had quietly pulled the plug the previous summer on the six-episode limited series Codes of Conduct from 12 Years a Slave director/producer Steve McQueen that was to star Paul Dano and Helena Bonham Carter. McQueen had already made a pilot and was at work on the remaining episodes when HBO shut it down.
• In March, HBO cancelled Togetherness, a ratings-challenged but critically praised half-hour dramedy from Mark and Jay Duplass, after two seasons. The Duplass brothers, who both work as producers, directors and actors — Mark co-starred on Togetherness and Jay co-stars on Amazon’s Transparent — had just months earlier signed a deal with Netflix to produce four feature films but have said that Togetherness was a passion project that they had hoped to continue making.

‘Vinyl’ in a Digital Age

In late January 2016, HBO announced that drama series chief and No. 2 programming exec Michael Ellenberg was out and comedy chief Casey Bloys, who developed Veep, Ballers and Silicon Valley was moving up to president of series, late-night and specials, a newly created position that put him in charge of comedy and drama series behind programming chief Michael Lombardo.

There was a lot riding on the mid-February 2016 premiere of Vinyl, Martin Scorsese and Mick Jagger’s $100 million series about the New York rock scene in the 1970s. The reviews were were solid but nothing like the rapturous raves and media heat Netflix had been getting around that time for Aziz Ansari’s dramedy series Master of None, crime docuseries Making a Murderer and edgy superhero series Marvel’s Jessica Jones.

Even the more positive reviews of Vinyl noted that it wasn’t a fresh take. Alan Sepinwall of Hitfix wrote that it “plays at times like Scorsese doing a cover band performance of himself.” The Los Angeles’s Robert Lloyd found the performances well-acted but “unbearably tired and uninteresting.” Vinyl looked like prestige TV, but it was a stodgy anti-hero drama in a market full up on stodgy anti-hero dramas.

Vinyl premiered to 764,000 viewers, which Vulture’s Hollywood business writer Joe Adalian termed “shockingly low.” Vinyl was not one of the 100 most-watched shows on cable the day it premiered, and it quickly left the TV conversation on social media and popular entertainment sites. A few days before airing the second episode, HBO renewed it for a second season — a signal to viewers that Vinyl was worth committing to.

At the end of the season, HBO canned Terence Winter, Vinyl’s showrunner and HBO veteran who had created Boardwalk Empire and was a longtime writer/producer on The Sopranos. A few months later, HBO rescinded the Season 2 order and cancelled Vinyl after one season — the first casualty of a new programming regime. In early May when HBO promoted two senior execs, the announcement said that the two would report not to Lombardo but to Bloys.

Lombardo Out, Bloys In

In late May HBO announced that programming chief Michael Lombardo would step down, and he said that day in a lengthy interview with Deadline’s Nellie Andreeva that he — rather than HBO — had made the decision shortly after the network’s big Emmy night eight months earlier. Lombardo, who spent 30 years at HBO and the last nine years as president of programming, said in that interview the elevation of Casey Bloys in December was part of a succession plan that he and HBO chairman Richard Plepler had put into place after the Emmys.

That sounds awfully tidy. The announcement came midway through the run of Game of Thrones, Veep and Silicon Valley, which was about the only time Lombardo could go out on top. HBO would be dangerously thin on original programming for the eight months remaining in the year — one limited series (The Night Of), one drama series (Westworld), two comedies for summer (Ballers, Vice Principals) and two comedies for fall (Divorce, Insecure).

At the time of the announcement, Lombardo had ordered only four new original series in the previous year — Vinyl, The Brink, Westworld and Ballers — that actually made it to air. Vinyl was a ratings bust, The Brink was a critical bust, Westworld was facing production delays and actors’ union concerns about “genital-to-genital touching,” and Ballers would be the only returning show ready to go in the seven remaining months of 2016. HBO was as bare on series content as any point in the last five years and, as the Hollywood Reporter’s Lacey Rose noted, despite having more than 100 projects in various stages of development last year.

The list of people who working on show for HBO a year ago and today are not — Jenji Kohan, Gus Van Sant, Mike White, David Fincher, Steve McQueen, etc., plus people like Sarah Silverman and Mike Myers who left after production deals never led to series orders — was impressive enough to make A-list talent wonder whether selling a script to HBO means two years of fruitless development hell followed by a quiet exit without a show on the air.

The announcement of Lombardo’s resignation came on a Friday. The following Monday, May 23, HBO announced that Casey Bloys would become its president of programming. Bloys, as multiple outlets reported, was given broad responsibility at the network with the divisions for scripted series, limited series, films, documentaries, sports at HBO and Cinemax reporting to him.

Summer, Fall and Beyond

The mandate for Casey Bloys at the time of his promotion to programming chief was clear — get shows out of HBO’s sclerotic development maze and onto subscribers’ TVs and digital devices. HBO had several series already in preproduction or production that Bloys had a hand in developing in his roles prior to becoming head of programming, including:

• Crashing, a comedy series from Judd Apatow and Pete Homes that will start Holmes a comic who stays on friends’ couches after his wife leaves him.
• Big Little Lies, a limited series from David E. Kelly starring Nicole Kidman, Reese Witherspoon and Shailene Woodley.
• The Young Pope, a drama series and co-production with Sky and Canal Plus starring Jude Law as a conservative American pope.
• The Deuce, a drama series starring James Franco and Maggie Gyllenhaal about the Times Square porn industry in the 1970s.
• Sharp Objects, an adaptation of the Gillian Flynn thriller that will star Amy Adams and that Deadline reported HBO won in a competitive situation against Netflix.

In a show of momentum, HBO rolled out a steady drip of news in the first few weeks after promoting Bloys to president of scheduling — the fall schedule, a series order for Bill Hader’s hitman comedy Barry, drama pilots from Academy Award winners Adam McKay and Kathryn Bigelow, and a new season of Curb Your Enthusiasm after a five-year absence.

Bloys got a must-needed shot of energy over the summer from The Night Of, a ratings and critical hit starring Riz Ahmed who may or may not have committed a murder and John Turturro as his defense attorney. The series is a likely 2017 Emmy contender for limited series, and Bloys has said he hopes creators Steve Zaillian and Richard Price can build it from a one-off limited series into an anthology series.

Over the course of the summer and early fall, HBO would announce a straight-to-series order for an untitled family drama from Six Feet Under and True Blood creator Alan Ball, a new anthology series from Mark and Jay Duplass under their existing deal with the network, and a new half-hour nightly news series from Vice Media that had been in the works for some time.

Bloys also cancelled Vinyl, for which HBO had already hired showrunner Scott Z. Burns to replace the fired Terence Winter. The decision was apparently abrupt, as co-star Ray Romano had done an interview with Variety only a week earlier that HBO publicity almost certainly would have nixed had it known the show, which had already been renewed for Season 2, was about to be cancelled.

HBO’s fall season has been the steadiest part of the year for scripted programming. Long-delayed Westworld premiered to solid reviews, has averaged 11.7 million viewers across all platforms, and HBO just picked it up for a second season (which may not air until 2018). HBO also already renewed all three of its fall comedies — Divorce, Insecure or High Maintenance — though none were breakout hits.

Several other projects that HBO had hoped would drive younger non-subscribers to HBO NOW this fall have not gone according to plan. HBO cancelled Any Given Wednesday after only four months on the air, and the 2016 election came and went without Jon Stewart’s animated series making it on the air or HBO making other use of Stewart during the election season. (HBO is now saying “maybe by February or March.”)

Vice News Tonight — a globally focused news magazine with segments reported by millennials with bad haircuts — has not found a significant audience for the live airings. HBO has said that “hundreds of thousands” of viewers watched the series on digital platforms during its first two weeks on the air, but HBO has not provided total-audience data as it has for other shows.

Netflix and Amazon Are Ahead

In 2014, HBO made a deal with Amazon — $300 million over three years, according to Recode’s Peter Kafka — to provide HBO’s back catalog of shows like The Sopranos and True Blood to Amazon Prime subscribers and to gain spots on Amazon’s then-new Fire TV devices for HBO NOW and HBO GO.

Two years later, HBO has its apps on every major device and $100 million a year isn’t much for a crown-jewel TV catalog when Netflix is paying $50 million for off-network rights to FX’s American Crime Story: The People vs. O.J. Simpson. HBO didn’t launch HBO NOW until a year after the 2014 deal with Amazon and streaming services have evolved more toward exclusivity since then, so it would make sense that HBO would take back that catalog and make it exclusive to HBO and HBO now when the deal expires next year.

If AT&T’s merger with Time Warner is approved by regulators, HBO would benefit from the marketing and distribution of AT&T’s DirecTV and U-verse, which are the providers for roughly a quarter the 94 million bundled TV households in the United States. The biggest risk to HBO is that the 1 million households a year who are cutting the cord — roughly one-third of whom subscribe to HBO through their bundled TV provider — will disappear forever.

The other risk and the one that HBO is in the best position to address is that subscribers will stop seeing a $15-a-month value. HBO has built its premium brand over the last 30 years by carefully cultivating a handful of great shows and charging subscribers a hefty premium, but now it’s competing with Netflix, which makes shows as good as HBO does and a lot more of them and for two-thirds the cost.

And it’s competing with Amazon and Starz and Filmstruck and Seeso and a dozen other services that all have their own exclusive shows.

And they’re all a click away.

Scott Porch writes about the streaming-media industry for Decider and is also a contributing writer for Playboy and Signature. You can follow him on Twitter @ScottPorch.