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It is well documented that Blockbuster’s dominance in video rentals spurred the launch of netflix. What’s less well known is that it was also the catalyst for HBO’s pivot to original programming, according to former HBO and Time Warner CEO Jeff Bewkes.
HBO, which stands for Home Box Office, centered its original consumer proposition on bringing unedited theatrical films into people’s living rooms. Launched in 1972, HBO charged a monthly fee to let consumers watch full-length movies at home without ads. While other premium networks offered similar products, such as Showtime, Encore and Starz, HBO continued to add subscribers during the 1980s by offering movies as well as a small handful of live boxing, specials on comedy and concerts.
The first one Blockbuster opened in 1985. In the late 1980s, Blockbuster undermined HBO’s business proposition. Consumers now had another way to watch uncut, ad-free movies at home, and now they could do it on demand. HBO only showed one movie at a time. Blockbuster offered thousands of movies. Movie studios saw the rental market as a booming industry and offered Blockbuster its movies six months before HBO’s window.
“Movies were our biggest selling point,” said Jeff Bewkes, former CEO of HBO and Time Warner, who spoke to CNBC as part of a digital documentary about HBO’s history. “We’re sitting at HBO saying, ‘We’re screwed.’ Our #1 reason people want to subscribe to HBO is now being taken over by Blockbuster. What are we going to do?”
HBO, at the time run by Michael Fuchs, decided the answer was original programming. With just a few million dollars to spend, Fuchs placed two small bets on two original comedy series: “Dream On,” which premiered in 1990, and “The Larry Sanders Show,” which arrived in 1992.
“It pretty much went over our budget,” said Bewkes, who started working at HBO in 1979 and led the network from 1995 to 2002. He then became CEO of Time Warner, HBO’s parent company. “We used to call it the best hour on TV. But I used to tweak Michael [Fuchs] on that, ‘Yeah, the best hour on TV – it’s literally almost an hour only because we only had 10 half hours a year of ‘Dream On’ and ‘Larry Sanders.’ We had 10 hours of serious programming. We would repeat things until we were nauseous.”
While HBO had dabbled in original content before, including releasing Jim Henson’s “Fraggle Rock” in 1983, “Dream On” and “Larry Sanders” were HBO’s first two adult hits. The two shows ran for six seasons and ushered in HBO’s golden age of original programming, paving the way for “Sex and The City,” “Oz” and “The Sopranos,” all of which aired for the first time in the late 1990s when Bewkes was CEO of HBO.
Tony and Carmela Soprano.
Source: HBO | Youtube
Even after “The Sopranos” launched, HBO still faced a dilemma about how much to invest in original shows. HBO’s television schedule changed constantly, depending on the length of feature films. While network shows always aired at a set time, HBO didn’t have that luxury. There were also no consistent intro shows to boost viewership for new programming, as NBC built with its “Must See TV” Thursday featuring shows such as “Seinfeld,” “Friends “, “Mad About You” and “ER” in the 1990s.
HBO tackled Blockbuster’s “on-demand” advantage and differentiated itself from network television by creating technology that made past episodes available to subscribers. HBO On Demand began in 2001, allowing subscribers to catch up on previous seasons of shows and build a larger episodic audience for episodic series.
Jeffrey Bewkes, former CEO of Time Warner Inc. and HBO.
Christopher Morin | Bloomberg | Getty Images
“It allowed us to do long form,” Bewkes said. “It gave us the ability to do completely different things. Now we can do shows like ‘Band of Brothers’, ‘Sopranos’ – something where it’s sequential. If you haven’t watched the show last week, you could watch it this week.”
Blockbuster ended up being the company that couldn’t recover from a disruption. It filed for bankruptcy in 2010. AT&T acquired Time Warner in 2018. Renamed WarnerMedia, AT&T divested the unit in a merger with Discovery Communications Last year forming Discovery of Warner Bros..
If HBO’s early investments in original programming hadn’t been met, Bewkes admitted he wasn’t sure what HBO would have done to fight Blockbuster.
“Thank goodness these shows [hit]”, Bewkes said. “If they hadn’t knocked, I don’t know what would have happened.
Disclosure: NBCUniversal is the parent company of CNBC.
WATCH: Full interview with former Time Warner CEO Jeff Bewkes on the evolution of HBO