Battlelines: Sky, HBO & Max in the UK

Battlelines: Sky, HBO & Max in the UK

I’m fascinated to see how Sky manages the seemingly inevitable launch of Max as a streaming brand in the UK.

Things came to a head this week as Sky launched a lawsuit against Warner Bros Discovery (WBD) accusing it of a contract breach, in large part because of how a new Harry Potter series is likely to be funded, and who therefore gets the rights to it in the UK, Italy and Germany.

There are so many layers of this, that it gets quite complicated.

Sky is owned by Comcast, who in the US is major cable operator – itself a declining business (Well the TV side of it anyway. Internet access is a separate question.) They own NBC Universal which includes the legacy NBC TV network, as well as the streamer Peacock.

Peacock isn’t really a brand outside the US. Peacock is a middling streamer that has relied heavily on sport in the US. NBC has just had an enormously successful Olympics in which Peacock served up everything live, alongside the NBC broadcast channels. NBC and Peacock have just signed up a significant new NBA deal for basketball, and they have Sunday Night Football with a major weekly NFL matchup. From a British perspective, they’re home to Premier League football.

In Europe, Sky is still a very profitable business, and major operator in the UK, Italy and Germany. A significant asset has been the big output deal Sky has long had with HBO – a division of Warner Bros Discovery. The very existence of Sky Atlantic has been built around massive HBO shows like Game of Thrones and Succession, and that deal has been mutually beneficial. At least it has been to date.

WBD has been able to cash large cheques without going to the trouble of building and marketing a new streaming service in a competitive environment, while Sky gets lots of top quality programming to drive and keep audiences.

Sport, and especially, Premier League football, is Sky’s other key area of strength.

Separately, Sky also has had output deals with what is now called Paramount Global, and in particular its putative HBO competitor Showtime. But Showtime has waned and is now part of Paramount’s own streaming service Paramount+. It too is a middling service, and Sky works as a partner in the UK to promote it. Paramount Global is also subject of a protracted sales process that is reaching a conclusion as I write this.

Meanwhile, WBD has its own streaming service – now known simply as Max.

In territories where it operates it is home to HBO shows like the aforementioned Game of Thrones, Succession and many more. Max has been rolling out in various European territories, and WBD is slowly corralling its assets into that simpler offering. But it has not launched in Sky’s territories – the UK, Germany or Italy – where Sky and WBD’s output deal has been in place. In the UK, WBD’s streaming offering is, for the most part, Discovery+.

The exact terms of Sky’s output deal with HBO are confidential, but in practice it has meant that every show that appears on the linear HBO channel in the US airs on a Sky channel within Sky’s territories in Europe. But with some exceptions (e.g. Chernobyl), Sky is not listed as a producing partner for those HBO shows. They just have rights to air them.

There are exceptions. Show’s that are co-funded by HBO, but are not 100% originals sit outside the deal. E.g. His Dark Materials was a BBC/HBO co-production, so the BBC has UK rights. The same applies for certain documentaries where HBO is a co-producing partner. E.g. Finding Neverland was an HBO/Channel 4 co-production. And as mentioned, Chernobyl was a Sky/HBO co-production.

Importantly, as WBD expanded its offering in the US to launch the service now known as Max (previously known as HBO Max), they began to order many more shows. These are labelled as Max Originals rather than HBO shows, and these titles seemingly fell outside of the Sky output deal and the shows landed in many other places in the UK. For example, ITV licenced The Sex Lives of College Girls, while the BBC licenced Tokyo Vice and Amazon licenced Hacks (at least seasons 1 and 2 – the recent Emmy-winning season 3 has yet to show up in the UK). Some big series like Steven Soderbergh’s Full Circle have yet to find any home in the UK. Although perhaps there’s a reason for this…

What has come out in the complaint that Sky has served in a US court is that Sky recognised the danger of WBD launching its service in markets where Sky was currently its partner. So Sky and WBD agreed a funding plan for series ordered as Max Originals.

WBD would provide Sky with regularly updated lists of shows that were likely to be ordered, and Sky would agree to fund at least two of those series each year for five years from 2021 to 2025 inclusive. The shows had to be ones that would be likely to be returning series, and the funding level offered by Sky would be between 20% and 25%. This was for hour long shows and not limited series.

In return for the funding, Sky would be able to market and monetise those shows for the life of series plus twenty years in its regions. For a show like the upcoming Harry Potter series which may run for ten seasons, if Sky were a co-production partner, then they would retain the rights to that show in their markets for a total of 30 years!

According to the complaint that Sky has lodged with New York’s Southern District court, WBD has not and did not hold up its end of the bargain. To date, just a single series, The Pitt, has been funded under this agreement, with that agreement only very recently reached.

More particularly, Sky is accusing WBD of deliberately and unfairly excluding the forthcoming Harry Potter TV series from this agreement. Sky very much wants to get Harry Potter rights in its territories, and as things stand, it has been excluded from being a co-production partner.

The full complaint is very readable and well worth going through if you’re interested in these kinds of machinations.

In response, WBD has said it will “vigorously defend” itself. It told the FT: “[This] lawsuit makes it clear that Sky is deeply concerned about the viability of its business were it to lose our award-winning content.” And it would be “undeterred with plans to launch Max, including the new HBO Harry Potter series, in the UK and other European markets in 2026.”

The existing Sky/HBO output agreement is reported to expire in 2025.

Exactly what happens to ongoing shows that are already running on Sky and are likely to still be on the air in 2026, post the end of this agreement, such as The Last of Us isn’t clear although I’d suspect that Sky would retain some rights to them, but that will be subject to whatever details are in Sky’s output agreement with WBD for HBO programming. A recent Deadline report suggested that House of the Dragon was acquired outside of the pact, and would therefore remain on Sky regardless (whether it stayed there exclusively is a separate question).

But I’m also beginning to wonder if WBD is now beginning to stockpile series for a putative wider UK/Italy/Germany launch of Max in 2026. Is that why season 3 of Hacks hasn’t appeared on Amazon? And is it why shows like Full Circle have not been sold to a UK broadcaster or streamer?

While Sky has talked about wanting to work closely with WBD over a launch of Max in its territories, this legal case is certainly going to strain relations.

At the Edinburgh TV Festival last month, Sky Studios CEO Cecile Frot-Coutaz was reported as saying there is “no scenario” in which its pay-TV customers would not have access to WBD’s Max content when it launches in the UK. That same report suggested that both sides had been making positive noises about how the Sky-WBD relationship would work when a direct-to-consumer Max launched in the UK.

Working with Sky would give Max a big foothold when it launched, and if that relationship soured, it would make marketing the new streamer that bit more expensive for WBD. Sky also has a deal for WBD movies which would include the upcoming reboot of the DC universe, and giving up those revenues would be a risk for WBD. I’m not sure how big Paramount+ would be in the UK were it not for Sky giving it a leg up. Taylor Sheridan and the Yellowstone universe are nowhere near as big in the UK as they are in the US. And I’m not sure that the Star Trek universe can make up for it. Although Paramount+ has created a number of UK original drama and reality series, I’m not sure many have yet cut through. You feel that it needs to merge with another streamer to create proper scale.

When Max launches in the UK and is merged with Discovery+, the sports offer will be an important part of it. WBD says it did well with its Olympics rights this year, but it’s the week-in week-out rights that matter more. It has some Premier League games, and a lot of UEFA Champions’ League football, but Sky has better sports rights offer overall.

So questions do remain how viable Max on its own might be in the UK. Sky would be an important partner in the normal scheme of things. But this lawsuit does create some very interesting questions. Sky is desperate to get in on the ground floor of the upcoming Harry Potter series, and if that door is slammed shut, might it have broader repercussions with how WBD is able to launch Max in the UK?

And Sky does rely on premium HBO programming across many of its channels including Sky Atlantic, Sky Comedy and Sky Documentaries. How many of those titles from Game of Thrones to Sex and the City would remain on Sky once Max has launched? Their loss would leave a big quality hole.

This will be something to watch.


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