(Bloomberg) -- Hollywood wasn’t ready for the internet when Jason Kilar came to town in 2007. Kilar, a Pittsburgh native, had taken a job as the founding chief executive officer of Hulu, a new streaming service that sought to capitalize on the growing number of people watching video online.
Hulu debuted the same year as Netflix Inc.’s streaming service. But while Netflix was co-founded by Reed Hastings, who studied computer science, Hulu had been devised by Fox and NBC, entertainment companies that made most of their money in television. Media giants had enjoyed years of stability underpinned by cable TV, as every year brought new channels and higher profits. Kilar, who worked at Amazon.com Inc. before joining Hulu, couldn’t rock the boat too much.
But Kilar has now returned to Hollywood as the industry undergoes its greatest transition since the birth of television. TV networks have lost viewers to Netflix and advertisers to Google Inc. and Facebook Inc. Under pressure from investors to deliver growth, media companies have consolidated, restructured and restructured again.
In just the past six months, CBS, Comcast Corp.’s NBCUniversal, AT&T Inc.’s WarnerMedia and Walt Disney Co. have all announced new streaming services, named new CEOs and fired staff. (In a bit of irony, the longest-tenured leader of a major entertainment company is Hastings, a principal agitator of the streaming revolution.)
Kilar is one of those new CEOs. He returns to the scene as the head of WarnerMedia, an empire that spans HBO, Warner Bros., CNN, Turner Sports and Cartoon Network. His mission, as it was more than a decade ago, is to push a legacy media company into the future. Only this time, he’s answering to a phone company instead of Mickey Mouse and Rupert Murdoch.
Kilar made his first major move Friday, dismissing three of his chief deputies and restructuring the company to focus on the HBO Max streaming service.The 49-year-old CEO spoke with Bloomberg News over the weekend about competing with Netflix, the future of the movie business and his fight with Amazon. The discussion was edited for clarity and length.
You just fired three of your top deputies, including the two people in charge of programming for HBO Max. Why was that necessary?
The decision had nothing to do with performance in any shape or form. In looking at where we’d like to go and how the company was organized, we had two content organizations, and they both worked on HBO Max. The tough decision I made was to go from having two to one. I think it’s the right thing to do for the company in the interest of focus.
You talk a lot about prioritizing HBO Max. Cable is still the profit center for your company, so how do you invest in the internet without letting your TV networks wither and die?
We’re an organization that is over 25,000 team members. We can be world class at a number of things, including cable channels. By any measure, they’re very strong businesses. I feel very good about the teams leading the charge, and we are leaning into them. We will be around to serve consumers who want to be served in that manner for as long as they want to be served.
There are still people who buy DVDs — a lot of them — and it’s a great user experience. It’s not for us to judge and dictate which way a consumer should be served. If we were a startup with five people, we’d have to choose. But we have over 25,000 people.
(That 25,000 figure is about to change; Kilar plans to cut staff, but declined to specify how many he would fire.)
Will people still pay for cable in five years?
A good way to think about it is: How long will the gasoline, internal-combustion engine exist for cars? I drive an electric car, and I’m never going back. That said, I wouldn’t be surprised if our great-grandchildren still see internal-combustion engines on the road. There’s no doubt cable will continue to decline given the rise of streaming. But I don’t think it will be in the rearview.
How would you assess the performance of HBO Max so far?
I’m very happy with it. People forget, but it took Netflix four years to get to its first 1 million subscribers. It took Hulu about a year. HBO Max got there in a matter of weeks.
Does the service have a breakout hit?
Keep in mind, the pandemic has impacted all of us. When you look at what we launched with — “Love Life,” within a week or two, we renewed for season two. It’s something I’ve been personally happy with.
In terms of a breakthrough hit that dominates the pop-culture landscape, it’s fair to say we don’t have that yet. I absolutely believe it’s coming.
The streaming services that launched during the pandemic seem to have been affected more than those that were up and running before. How worried are you about the lack of fresh shows coming to HBO Max later this year and early next year?
Because of our size and scale from a production machinery perspective, I feel good about the balance of this year and early into next year. But there’s no doubt that anybody in this industry in 2021 — that’s when you start to feel the impact of an extended shutdown.
We’re working very hard — all of us, not just WarnerMedia — at doing all we can to make sure we are focused on safety. The good news is we’re already doing it, and up and running overseas. I’m thankful we have a global footprint.
You mentioned your time at Hulu. Hulu was once larger than Netflix. Why did Netflix became the dominant player?
The main difference was the fact that Netflix leaned heavily into going global. Hulu was able to launch in Japan. But it didn’t launch globally.
Why did Hulu go to Japan first? Most experts agree it is a very challenging market for foreign media companies.
A lot of media companies, including those in the capitalization table of Hulu, had existing businesses in most countries around the world. There was a desire among those executives not to disrupt themselves. The decision each had to make was: Do I disrupt myself by having Hulu enter Germany, or the U.K. or Italy? Or do I go someplace I don’t have a large business?
They decided to go in the latter. If you talked to any of them today, they’d say it was a mistake. I’d say it was a mistake, and one of my biggest regrets was not being able to persuade the board of Hulu to go international.
What are your plans for HBO Max overseas? Will you be producing a lot of original series on top of what HBO already does?
Expect to see Latin America as a first focus. It won’t be easy, but we’re committed to it. The customers deserve it and ask for it. HBO does do local productions, which I’m very thankful for. It gives us some progress already. I absolutely anticipate we will have local productions for consumers.
What does HBO Max offer that Netflix doesn’t?
Quality. When I first joined the company, I did this introduction video from my garage to say hello. I got announced on April 1 and didn’t start until May 4. I did my best to allow people to see a face with the name. I did a two-minute video to introduce myself and explain why I made the decision to join the company. The first thing I said was “quality bar.”
We all have quality bars. When I think about Casey Bloys, Toby Emmerich and Peter Roth, the thing that’s consistent among their teams and their people is where they place the quality bar, which I’d argue is just a cut above.
Over the past couple years, we’ve gone from a handful of streaming services to now a glut. How many will most people pay for?
Take a look at the past 40 to 50 years in media, and I’ll focus on the U.S. There’s been an explosion of content offerings: from three and four channels to 800 in terms of pay TV. And yet what you see is there are four really big ones — maybe five or six — that account for a lot of the value.
I think you’ll see the same thing happen here. There will be more than 800 streaming services. There will be thousands. But there will be five or six, maybe a little less or more, that will account for the majority of mind share.
This is a tenuous moment for the open internet. European regulators are cracking down on U.S. media companies, and the U.S. is banning Chinese-owned internet services. Do you anticipate foreign governments being hostile to U.S. streaming services?
I don’t know. The geopolitical tension has certainly risen this year for sure. I don’t know where it goes. I don’t think anybody does.
On the one side is the consumer who wants more. That means stories from your country of origin, but also any country in the world. Any consumer would vote for more access.
On the other side is what you’re highlighting, which is government action and putting up barriers. I’m hopeful as a believer in democracy and access to information that it doesn’t become Balkanized.
Unlike Netflix or Amazon, WarnerMedia is unabashedly in the news business as the owner of CNN. Will that become a problem as you push your streaming service around the world. Will you take down programs if asked by foreign governments?
They are run completely separately, as they should be. The news and information business is world class; I’d argue they are the best in the world.
We’ll do what’s appropriate. I haven’t seen it yet. If it were to come up, I’d do what’s expected. Let CNN do what it should do and also do what’s appropriate for entertainment.
Let’s talk about movies. Every studio is experimenting with releasing movies at home instead of theaters, or at home shortly after theaters. Three years from now, what will the movie business look like?
I might be in the minority when I say this, but I happen to, as a consumer, really enjoy going to a theater with my wife and watching a great two-hour story. I love it. I don’t do it exclusively; I watch a lot of movies at home.
There’s a rush to mutually exclusive outcomes — there will either be a vibrant and huge theatrical business or no theatrical business. I don’t see that. You’ll see changes in theatrical, specifically different windows. Historically you could see windows of 130 days and longer; that was just the way the world was for decades. I don’t think that will be the way of the future.
A few years from now, will you still release movies that stay in theaters for a few months? Will “Wonder Woman 3” be exclusively in theaters for 130 days?
We’ll see a shorter window for all movies — not just romantic comedies, but even for the biggest, most ambitious films.
The same goes for other forms of entertainment. Currently Broadway musicals tend to work through different windows. Something goes to New York, and it’s a success — if it’s big, it goes around the country and the world through touring productions. Then eventually it goes to TV distribution. “Hamilton” is a good example of that.
There is no reason it couldn’t have been presented to consumers years ago when they recorded it. I wouldn’t be surprised if next year or the year after that, great huge musicals show up on screen — rather than on stages — much earlier.
You talk a lot about putting the consumer first, which is very Amazon. It’s something all the big internet companies say they are doing, but it seems they are often conflating their own interests with those of the consumer. What do you make of the growing concern that large internet companies are bad for society? Are some of the internet companies too big?
When economies and industries are sitting on a digital foundation, what tends to happen is concentration of successful companies unlike anything history has seen. We have fewer companies but larger companies.
I think you nailed it when you said that some companies are conflating their interests with statements about consumer focus. What you see is a lot of decision-making in the interest of the company as opposed to taking a breath and being focused on the consumer.
Can you give an example?
If Amazon were truly focused just on the consumers with Fire devices, HBO Max would be on Fire devices. The consumer wants it.
Why isn’t it?
Call the Seattle folks.
Will this get resolved?
My mother always considers me a very optimistic person. The optimistic side of me says it will be.
As we head into the fourth quarter, when gift giving happens, it becomes a more material situation for a seller of hardware. There are alternatives in Google Chromecast and Apple TV.
Considering your belief in internet TV and streaming, I wonder how you see sports media changing. It’s the business holding the pay-TV business together right now.
Over the next couple of decades, the dominant means of content distribution, including sports, will be internet protocol. You will see a transition from satellite and cable to IP in terms of delivery.
I get very excited about how dynamic a live sporting event can and should be once it’s on IP, in terms of how social, how dense the information should be. Our grandkids — if not kids — will look back at live sports broadcast from 2020 and think it was so pedestrian and simple.
But are you selling individual games? Are people paying for a Turner Sports and ESPN+ service? Or are they paying for a bundle?
I think there will be a bundle. If you could go back in history and start things fresh, you’d give customers a choice of a la carte and bundle. The bundle offers more value, but having an a la carte option is also lovely. We don’t get the luxury to go back in time. You will see a continuation of the bundle that has most of the major sports.
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