HBO’s Over-the-Top Service: Here’s What We Know

Time Warner HBO WB Presentation

HBO has shaken up the media biz with its plan to launch a standalone over-the-top service next year, making the pay-TV titan the first major cable programmer to be marketed to consumers who do not pay for a traditional MVPD (multichannel video-program distribution) subscription.

HBO chairman-CEO Richard Plepler made the announcement Wednesday with dramatic flourish at Time Warner’s investor-day presentation: “It is time to remove all barriers to those who want HBO,” he said.

Details about HBO’s plans were scant. Between Plepler’s comments and discussions with industry insiders, here’s what we know so far:

  • The new offering is likely to resemble the existing HBO Go authenticated service in offering a broad on-demand menu of new and vintage HBO and Cinemax programming. It is not expected to emulate the extensive channel cluster that linear subscribers receive.
  • HBO aims to work with cable operators in marketing the service as a carrot for those subscribers who only take broadband service from cable providers. “There’s tremendous opportunity for us with our partners to go after these subscribers,” Plepler said. Just to reinforce the point, he noted that the primary focus early on would be the roughly 10 million U.S. households that receive video only through broadband. He called them the “low-hanging fruit.”
  • HBO has had conversations with a range of partners for years, but no deals are imminent. Wednesday’s announcement was akin to hanging out the “Open for Business” sign.
  • Going it alone as a direct-to-consumer offering is an option for HBO, but sources said that is seen as a less attractive route that partnering with MVPDs or established digital players. Industry sources noted that digital distributors of an unbundled HBO could range from Microsoft Xbox and Sony PlayStation to Google and Apple.
  • There’s no word yet on pricing for the service, which is a key question. But sources say it’s unlikely that HBO would significantly undercut its traditional partners.

HBO’s announcement caught pay-TV providers by surprise, but key sources said the largest operators have been expecting this move for some time. Comcast, Time Warner Cable, Verizon and AT&T are already offering low-cost TV packages that include HBO and only broadcast TV channels in an effort to appeal to cost-conscious consumers. So there is precedent for Plepler’s point about working with MVPDs to use HBO as a carrot to lure reluctant subscribers.

In the post-presentation Q&A, Plepler downplayed the “cannibalizing” effect that this effort could have on basic cable service, which is important to HBO’s corporate sibling, Turner Broadcasting. Plepler cited a stat that 85% of Netflix subscribers also take some form of MVPD service.

MVPD sources were skeptical that an OTT HBO service could include the entirety of the HBO program library, as HBO Go now does.

Sources were also quick to note that many operators have “most favored nation” clauses in distribution deals with HBO. Those would allow them to drop the price they charge if HBO were to allow another distrib to sell it at a discount. It’s unclear how that would be sorted out of the OTT service is a different animal than the linear package.

Industry sources say they expect Showtime to follow suit in the near future. In a statement, Showtime would say only that OTT is something it has been “examining for some time. The subscription model is ideally positioned to take advantage of developing technologies in the consumer marketplace.”

(Pictured: Warner Bros.’ Kevin Tsujihara, Turner’s John Martin, Time Warner’s Jeff Bewkes, HBO’s Richard Plepler and Time Warner CFO Howard Averill at Wednesday’s investor presentation)

Filed Under:

Want to read more articles like this one? SUBSCRIBE TO VARIETY TODAY.
Post A Comment 2

Leave a Reply

2 Comments

Comments are moderated. They may be edited for clarity and reprinting in whole or in part in Variety publications.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

  1. negenge says:

    For me in Canada, the only way to have HBO was in a bundle with four movies channels I had no interest in whatsoever. Paying $24.99 a month for the couple of hours of HBO programming I wanted per week wasn’t going to happen. I happily pay $7.99/month for Netflix and $4.99/month for Acorn TV, and would pay a reasonable amount directly to HBO without any reservations.

  2. RJR says:

    Now everyone can see movies altered/cropped by HBO. (“Hey, it’s not HBO. It’s TV!”)

More TV News from Variety

Loading