In a major strategic shift, HBO will license the technology underpinning the standalone streaming service it plans to offer in 2015. The company has killed a project called “Maui” that would build the new streaming service in-house, according to an internal memo (see below).
Rather than build the technology internally, the company has struck a deal to use an external technology offering from MLB Advanced, according to sources familiar with the situation. MLB Advanced already provides white-label streaming technology for clients like WWE Network, but HBO will likely be its largest client. It’s unclear what this means for the future of HBO Go, the company’s existing streaming service for cable subscribers.
HBO hopes to launch the new standalone streaming service in line with the Game of Thrones season premiere in April.
Moving HBO’s new streaming service to an external platform is a blow to Otto Berkes, the chief technology officer of HBO. Since becoming HBO’s CTO in 2012, Berkes has brought in a number of his ex-colleagues from Microsoft and set up a large office in Seattle with 55 engineers, laying off a number of longtime employees in New York. The Seattle office, which is rumored to cost HBO as much as $100 million per year, has been the source of internal squabbling at the company. Insiders accused Berkes of building “a Napoleonic empire” within HBO.
From a recent Glassdoor review:
Earlier this year, HBO Go suffered several embarrassing outages during episodes of Game of Thrones and True Detective. According to sources, Berkes had known about a “memory leak” for nine months but decided it was a “non-issue.” That leak eventually led to the HBO Go outages. Internally, some accused Berkes of using the outages as a way to ask for more money to invest in his Seattle engineering team. He got the investment, but HBO executives have not been pleased with what he’s delivered. Berkes delayed product launches and was unable to deliver on upgrades. “If you look at what [HBO Go] is today versus two years ago, he hasn’t really done anything,” one source said.
As chatter about HBO’s standalone streaming service became more serious, HBO chose an external technology provider because, according to one source, “they realized he couldn’t pull it off.”
The MLB Advanced Media deal has fueled speculation that Berkes could be fired or demoted as early as this week. HBO declined to comment on Berkes’ future at the company. [Update: Berkes has resigned.] A spokesperson provided the following statement to Fortune:
HBO is expected to make a strong statement that it is a media company, not a technology company, one source said. The company does not want to be seen as chasing after Netflix (NFLX), which has led the TV industry’s push into online streaming. (Notably, Netflix was able to publish entire seasons of House of Cards and Orange is the New Black without any outages.) Netflix has always been a technology company trying to dethrone HBO. With the rise of cord-cutting, investors have pushed HBO to be more like Netflix. Taking HBO’s standalone streaming service away from Berkes’ internal team is a “direct antithetical response to Netflix,” one source said.
HBO is a subsidiary of Time Warner Inc. (TWX).
Here is the memo, sent by Mark Thomas, SVP of Technology Program Management, and Drew Angeloff, SVP, Digital Products: