39 Comments

Summary:

HBO is cementing its reputation as a trail-blazer with a new batch of hit shows and, more recently, a hugely popular mobile offering. But th…

HBO True Blood
photo: HBO

HBO is cementing its reputation as a trail-blazer with a new batch of hit shows and, more recently, a hugely popular mobile offering. But the company is determined to remain a traditionalist when it comes to its relation with tv distributors.

HBO Co-President Eric Kessler told a gathering of industry boffins this morning in New York that there is no chance his company will make shows like True Blood or The Wire available to digital non-subscribers. HBO currently has around 30 million customers, all of whom must buy its content as an upgrade from their cable or satellite package.

Kessler said that, despite the success of HBO GO (“It’s HBO Anywhere”), the company has no plans to offer the new mobile offering to a broad audience. HBO first unveiled GO as a browser-only service last year and then launched it as an app for phones and the iPad this spring. Kessler said 55 percent of GO downloads have occurred on the iPad (GO is not yet available on other tabloids) while phone downloads were about evenly split the iPhone and Android devices.

HBO’s decision to remain tightly wedded to the cable industry makes it something of an outlier in this age of aggregation. The rationale, according to Kessler, is that services like Netflix (NSDQ: NFLX) and Hulu are competitors and that HBO’s bread and butter is content not licensing.

The strategy makes sense but still seems like a risky one. The rising cost of basic cable means that would-be subscribers must shell out ever more money before they can even contemplate buying HBO in the first place. This means that HBO’s strategy remains based on persuading already strapped consumers to add more to their cable bill while also forgoing so-called ‘cord cutters’ altogether.

Kessler is undaunted, saying HBO regards cord cutting as a temporary phenomenon that will go away once the larger economy improves. He also says that HBO will flourish under its current model thanks to its star power (its latest coup is getting The Social Network‘s Aaron Sorkin to pen a series) and because its partnership with cable companies allow it to avoid transaction costs like billing.

It is hard to argue given that HBO has been dominant in its field for so long. Still, as a cord cutter who has seen a few episodes of HBO’s Game of Thrones and would pay to watch more on my iPad, the company’s decision is an incredibly frustrating one. I am not going to go out and buy a cable package simply so that I can pay even more to watch the show and, at the same time, I’m unable to buy it the current season on Amazon (NSDQ: AMZN) or rent it in a video store. There are no doubt a large (and likely growing) pool of customers like me. It is hard to believe HBO will ignore us forever.

Kessler was speaking at “VideoSchmooze NYC”, an event hosted by VideoNuze editor Will Richmond.

  1.  My frustration with HBO GO is that it’s only offered to a limited number of subscribers (Direct TV, Dish Network, Verizon, a few others). I subscribe to HBO through Time-Warner Cable and it’s not offered to me, and I’m pretty sure they don’t offer it to Comcast or Cablevision/Optimum subscribers either. So right now it seems like it’s more of a try-out period for them. It will be interesting to see what they do once DVDs become obsolete.

    1. It is available to Comcast subscribers.

    2. It is available on Comcast. 

    3. Comcast has already had HBO GO for quite a while, and Time Warner will have it quite soon; the two companies are finishing up the details of their deal.  I haven’t heard anything about a deal with Cablevision, though.

    4. They do offer it if you are a Cox subscriber. And that makes me smile.

  2. Cord cutters to HBO:  Your content really isn’t worth what you think it is!!!  Why do you think that “Entourage” and “Curb Your Enthusiasm” bombed in syndication?  The only reason people even think of watching is that they’re paying $15 a month on top of their already overinflated cable bill, and they’re trying to get their “money’s worth.”  Give us a break!

    1. actually Curb always sucked especially when edited and entourage should have ended 4 seasons ago. HBO has good content but then so does starz. I Bought them so I could watch the new Torchwood and got Boss as a + . Only reason I even have go has to do with $1 HBO for 3 months.

  3. HBO is just leaving money on the table.  I cut the cord 4 years ago and I wouldn’t go back for any show or network in the world.   And not paying that huge cable bill each month means I’m much more likely to buy HD streaming content of shows I really want to see or buy the Blu-ray.   But since HBO delays the ability to buy digitally or physically for 12 months, I end up just renting it on disc from Netflix.   I’ve already waited 12 months so whats one more?  If they gave me the option to buy it the day after it aired I’d gladly pay them 35 or 40 dollars to get a season pass.  Instead they are getting mere pennies from Netflix for that disc rentals.

  4. The context of what he said was that they did research on cord-cutters and found that it was almost negligible (my words, not his). They have a very healthy relationship with Pay TV Operators and that HBO was currently available in the vast majority of households. To dramatically change their business model to target some very small amount of people who didn’t want to pay for cable didn’t make sense. He’s right. 

    1. I think it’s more annoying that they’re such laggards on releasing their stuff for sale on Video-on-Demand sites plus DVD/Blu-Ray. Game of Thrones, for example, isn’t going to release the DVD/Blu-Ray for Season One until March 6, 2012 – nine months after the season one finale episode. That’s practically begging for your series to get pirated in the interval.

    2. It’s not the number of ‘cord cutters’ vs cable subscribers.  It’s the direction of change.  Video distribution has lagged behind other media in shifting the internet because it uses so much bandwidth.  It hasn’t been practical to move everybody’s television viewing to the internet.  

      No, I am not implying that consumers think about such things but they do notice stuff like lowered resolution, lowered frame rates mid-viewing pauses and random glitches. As home internet service has become faster and faster these issues are going away.  If he thinks they can hold onto their old business models forever then maybe he is better suited to go work for USPS or in the newspaper industry.  Business is booming with lot’s of job openings there!

  5. This is why “piracy” exists.  People want HBO’s content.  Most people want to pay for HBO’s content.  HBO is making it very difficult for people to do so.

    If they think cord-cutting is a “fad” they are wildly delusional.  It’s not just an economic thing….. I know many affluent (100K to 300K incomes) who have cut the cord…. they should talk to some people in their 20s and 30s

  6. Billing costs would really be that bad for HBO Go? I would love to give HBO money, but I am reluctant and unwilling to pay a middle man.How difficult would it be to add an encrypted paypal like service to HBOGO?? Can’t be much more than creating and setting up HBOGO, really??
     
     I guess I will hold out for the DVD of GOT, or continue to watch it elsewhere, it is great, but, last time I had cable I didn’t watch it much,and there was too much crap on. I don';t miss cable, and I know fewer people who have it or satellite that are my age. I think among younger people, 20s and 30s, internet streaming is the way we prefer things. I find it ludicrous and hilarious that Kessler thinks it is temporary. I don’t know what research or numbers they are looking at, but once you leave cable or satellite for more than a year, I wonder how many people feel the urge to resubscribe? Maybe they should investigate that. I think once you go without it for a while, you see just how unneccesary it is.  I know I don’t miss it, and if my monetary fortunes change, I don’t think I am going to choose to pay for that when I can pay for something else.

  7. It’s really interesting to see what appears (I say “APPEARS”) to me to be denial at this stage of the game from a high-ranking exec. HBO content is clearly being offered and consumed via multiple sources outside of the company’s channels and unless and until they offer a viable option, they miss an opportunity to own, monetize and control their content. Granted, the money and bother might initially not be worth it, but if they don’t own the space now, won’t the problem be greater as digital distribution becomes easier to pirate?

    1. Not necessarily. HBO probably figures that even if cord-cutting and the “cord nevers” (people in their teens and twenties who simply won’t buy a cable subscription in the first place) are a major problem, they’re a problem that won’t really start to hit them hard until at least 5-10 years down the line. At that point, HBO would have as much ability to sell digital-only subscriptions as they do now, without as much of the risk of jeopardizing the fees they get from cable distributors in the present.

    2. I have decided that I would perfer big companies to miss an opportunity to own, monetize and control their content. In the end it works better for everyone who wants to consume it. I hate the notion of artificial scarcity.

  8. “Kessler is undaunted, saying HBO regards cord cutting as a temporary
    phenomenon that will go away once the larger economy improves.”

    Ha!  And I will ride my horse over to the downtown theater and watch a live minstrel show while sipping sarsaparilla.

  9. I know several people who would gladly pay for GOT only. The rest of HBO is useless. Even an over-inflated al-a-carte would at least give an option for HBO to make something off those people. The alternative is TPB. HBO’s lose, not ours.

  10. I think HBO’s stance is understandable. Right now, they probably still make most of their money off of the fees they get from the cable/satellite distributors in exchange for making their channel available as a “premium” offering (DVD/Blu Rays and individual subscription fees likely come after that). They’re not going to risk undermining that source of income just to catch revenue from cord-cutters who are unlikely to be willing to pay the monthly price it would take to make an HBO GO-only online subscription profitable for them.

    That said, HBO does sell/rent some of their content on a per-episode basis via services such as Amazon’s online VOD. It’s mostly older shows, though, that have run their course (such as Deadwood and Rome). My guess is that HBO doesn’t want sales of VOD content to interfere with DVD/Blu-Ray sales.

    1. HBO makes their stuff available on iTunes and Amazon the same day it comes out on DVD/Blu-ray.

      1. You’re right. I mis-read the release date on some of the new stuff.

        That said, I think my main point still stands: a huge delay in release between the TV/HBO GO stream and the DVD/Blu-Ray/VOD is a huge incentive for digital piracy. I understand why they do it (they want it to come out in time to promote the next season of a series), but it’s still risky.

      2. Exactly! Cable cutters can watch HBO shows. They just have to buy them or rent the disc about 1 year later.

Comments have been disabled for this post