Time Warner Chief: HBO Now Has
Courtesy of HBO

HBO’s stand-alone digital streaming service has surpassed 2 million domestic subscribers, Time Warner chief Jeff Bewkes told investors Wednesday.

HBO Now launched in April 2015. Wall Street has been keenly attuned to the pace of subscriber growth for HBO Now as a bellwether of how major media giants will evolve their businesses in the digital era. Bewkes announced the subscriber number during his conference call with analysts following the release of strong fourth-quarter and full-year 2016 earnings.

“We’re really pleased with the progress” of HBO Now, Bewkes said.

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Time Warner at the end of 2015 disclosed that HBO Now had hit about 800,000 domestic subscribers. HBO Now is also important to Time Warner as HBO is in the midst of carriage renewal deals with major MVPDs, including the two largest cable operators, Comcast and Charter Communications. Having HBO Now as an alternative option to consumers will help HBO drive a harder bargain on carriage terms. These high-stakes talks also come as Time Warner is in the throes of trying to complete its merger with AT&T, which would put Time Warner’s networks under the same corporate roof as cable rival DirecTV.

HBO Now marks the first time consumers have had the option of buying HBO without taking any other pay-TV package. HBO has lined up heavy-hitters in the digital arena to help distribute and market the service, with Bewkes touting the gains driven by partnerships struck last year with Amazon, Microsoft’s Xbox, Samsung and PlayStation Vue.

Time Warner CFO Howard Averill reiterated during his remarks that HBO “has seen a nice uptick in OTT subscriber growth recently.” HBO intends to add more digital distribution partners to help sell the service to consumers who may not have exposure to traditional pay-TV marketing messages.

Averill emphasized that the company sees “a big, untapped subscriber opportunity in the U.S.” for HBO. In its traditional MVPD renewals, Averill said HBO is focused on structuring deals that give distributors incentives to drive new subscribers. He warned analysts that HBO will not likely demonstrate affiliate growth in the first quarter of this year, but he advised that HBO for 2017 as a whole is expected to deliver high single-digit growth in subscription revenue, which in turn will help boost its operating income.

“The more opportunities we have to distribute HBO to a multitude of different distribution services  … the better it is for our brand,” HBO chairman-CEO Richard Plepler said.

Plepler said the churn rate for HBO Now subs is the lowest since the service launched nearly two years ago. He chalked that up to the new wave of programming HBO has unleashed and the settling in and the expansion of the subscriber base with more older consumers who have more reliable income streams. “It speaks to the quality of the content and the range of content,” he said.

Plepler emphasized that viewing trends on HBO Now and HBO Go, the streaming extension for traditional MVPD subscribers, demonstrate the importance of having a wide range of offerings, from big-ticket dramas to documentaries and sports-related programs.

“Usage is going across a wide range of categories — it’s not just ‘Westworld’ and ‘Game of Thrones’ and ‘The Night Of’,” he said. “We’re in the business of curating great content. We’re very encouraged by what we’ve seen in churn.”

Stand-alone streaming services are also a growth focus for HBO on the international front. The company launched such services is Brazil, Argentina and Spain last year, with more on the horizon, Bewkes said.

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