Time to Free HBO Go From Its TV Shackles

Game of Thrones Emilia Clarke

Enough stonewalling, HBO. Let consumers pay for broadband-only subscriptions before it’s too late

A new season of “Game of Thrones,” a new round of groans. Because the HBO series had the distinction of being the most pirated show on TV last year, expect much blogosphere bellyaching on the sore subject of the premium channel’s digital platform, HBO Go.

If only it could be purchased without also having to pony up for a subscription, “Thrones” fans whine, so many wouldn’t have to resort to piracy.

But HBO has good reason not to untether HBO Go. Such a move would undoubtedly trigger a mass exodus from the subscriber base that provides the lion’s share of the $1.5 billion in profits the Time Warner unit pocketed last year. Such a split would also upset the pay TV distributors who fork over billions to lock up that programming exclusively, not to mention shoulder some or all of the marketing and subscriber acquisition costs.

And yet the whiners are correct: It’s time for a broadband-only offering from HBO in the U.S. Let’s call it HBO Go-It-Alone.

Reducing copyright infringement isn’t even the primary reason to make HBO Go available on a standalone basis. More to the point is that the demand for a broadband-only version of HBO is going to grow astronomically; the subscriber count for the linear channels will not.

(From the pages of the March 26 issue of Variety.)

Think back to last year’s “Take My Money, HBO” campaign, which induced thousands to declare via Twitter — unprompted by HBO — how much they would pay for a standalone broadband offering ($12 on average). If that’s what the prospect of such a product could elicit just midway through HBO Go’s three-year history, just imagine how that demand has risen as the app becomes ubiquitous across devices.

There’s got to be an untapped market segment among the 80 million broadband subs across the U.S. who aren’t going to pay for HBO as a $15 charge on top of a $70 basic cable tier, but will pay for HBO Go on top of a broadband subscription. HBO may already be learning about such consumer appetites in the Nordic countries, the only region where HBO Go is on its own, albeit in a very different market than the U.S.

The latter scenario invites a very real cannibalization threat to the former, but it’s not as if HBO Go-It-Alone would knock linear HBO off rocket-like growth trajectory. The channel’s sub count leveled off below 30 million years ago; the company has managed to maintain profitability by diversifying via everything from DVD sales to international expansion.

But that subscription plateau is precisely why HBO Go-It-Alone needs to happen. There is a way to manage the inevitable decline of linear HBO in such a way that it happens more slowly than the simultaneous growth of HBO Go-It-Alone. A broadband version can still command a decent price point without offering everything the existing HBO Go does, like curtailing access to previous seasons, restricting viewing to handheld devices, even delaying the premiere window for original series.

Time Warner might be surprised what limitations would be tolerated by consumers who are interested in HBO but will never cross the $85 barrier, and the differentiation from linear could diminish cannibalization.

This may all seem immaterial if pay TV distributors would disapprove. But don’t forget that some of the same distribution partners HBO can’t afford to piss off also have a vested interest in adding value to the broadband services that are becoming more important to their businesses. Helping cover the infrastructure costs of HBO Go-It-Alone may help make the economics work in a way they wouldn’t have worked if HBO was stuck with the bill.

The Comcasts of the world have to ask themselves whether HBO is of more value to them in the long term as a non-essential feather in the cap of its video business or as a gamechanging value-add to its triple-play offering.

Netflix is broadband’s biggest attraction, and that should worry Time Warner. But HBO Go-It-Alone would have the goods to compete against Netflix for subscription dollars on the strength of its vast original programming catalog.

That advantage, however, is going to last for only so long, given how aggressively Netflix is ramping up original efforts beyond House of Cards. As Netflix chief content officer Ted Sarandos recently summed up the competitive landscape, “The goal is to become HBO faster than HBO can become us.”

Whenever HBO execs are asked about the future of HBO Go, they qualify their strategy as their stance “today.” But they’d better move faster or the opportunity won’t look as good tomorrow.

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  1. Blaed says:

    I will not purchase HBO GO until I know I’m not paying for a channel on a television I will never have.

  2. pqbfa says:

    My family is moving to a new house in a month. As part of the move, we are cutting cable. We have a roku and subscriptions to Netflix, amazon prime and Hulu ( total cost is about $20 per month and $100 up front for the roku). For years, the only thing keeping me with cable is original hbo programming. Given these other options, it’s no longer worth the cost of keeping cable. I will miss seeing the new episodes of True Blood as they air. If hbo would go it alone, I would be the first in line. Until then, I will get the series from one of these other sources when they become available.

  3. Eric Yeager says:

    I agree with this article. I’d pay $40 a year to watch Game of Thrones. I would not pay $300 in television packages I don’t use, and then another $40 a year, just to watch one show. Ain’t happening. I don’t even use cable TV. I have Netflix, Youtube, and Amazon Videos right from my TV, and that is without a cable box attached. So yeah, forcing people to pay for TV they won’t use? Sounds like they are just begging people to pirate it.

  4. Mark Coleman says:

    I am in the UK and do not subscribe to any cable TV whatsoever. I do use Netflix and I would pay to access HBO Go and have an app on my Roku, PS3, XBox, whatever. No matter how HBO or the cable companies want to restrict content, I will never subscribe to “Sky TV” and I am one of many people who would be a viewer, who will not access via cable, whatever agreements are in place between companies.

  5. Eliza says:

    There is no reason why Hbo can not have their cake and eat it too. As a consumer, subscribing to just Hbo-go for a reasonable price without the middle-man would be more cost-efficient for families on a budget. However, other consumers do prefer to have the total cable package which may include some of the more exclusive cable channels such as show time, Cinemax, sports packages, oxygen, history,etc. – which may be an affordable for some. That is under $20 a month opposed to $100 a month; hbo will still make a profit. I would even agree on a one year contract in order to get hbo-go. All I’m saying is “hbo-go is the future, don’t limit the enjoyment to those who are able to afford it.” I am sure the the major cable companies and hbo can settle this in mediation. Best of luck to hbo.

  6. Joe Mogir says:

    Yeah, that’s a great idea. Piss off your distributors, who pick up all of your distribution, marketing, billing, customer service and bandwidth costs and switch to a model where you’d have to bear all of those costs yourself. Then charge your customers less for the service then they currently pay. That’s a brilliant plan. Sounds like you run a business that has managed the digital transition really well and are making tons of cash. Oh, wait…

    • Try actually reading the piece. As I clearly explain, it’s in distributors’ best interest to partner on a standalone HBO Go to feed their own broadband businesses. Sounds like you read the whole article though. Oh wait…

  7. Eric says:

    HBO will find that it is the Betamax of Cable before too long, if it doesn’t act: Like Betamax, it will have set the trend, gotten all the attention, but ultimately it will have been pushed aside by the VHS, Laserdiscs, DVRs, and Blu-Rays that did it better.

    • Alex Gamberg says:

      Absolutely need to cut the chord at some point; matter of when not if…Everything becoming decentralized, and eventually major service providers/ media conglomerates will begin to suffer. Consumers want it, and I understand the contracts they have with service providers at this point far outweigh the revenue they could bring in with a stand-alone service, but you offer an interesting alternative. It will be interesting to see when they will adapt because they have continuously (as you’ve mentioned) taken the stance that ‘today’s’ model works great, so why change?

      Beyond offering a stand alone, I think they can also find ways to increase viewership by looking for options to produce their content (beyond the budgets created based on subscription/viewership data). Offer a way in a post I wrote today about it actually, worth checking out.

      http://alexgamberg.blogspot.com/2013/03/could-game-of-thrones-become-even-more.html

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