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The Problem With Going TV Everywhere or Bust

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After nearly two years of development, TV Everywhere services are finally taking off, with the launch of mobile apps and availability of Internet-delivered programming soon being made available through apps on connected TVs and other platforms. But while some cable networks have found a way to move forward with TV Everywhere initiatives while also making their content available through Netflix and other online distributors, others — like HBO (s twx) — are putting all their faith in one distribution model.

In my latest piece on GigaOM Pro (subscription required), I examine whether or not HBO’s big bet on TV Everywhere is likely to pay off. The conclusion? That HBO will need to jack up its rates to cable, IPTV and satellite distributors to justify passing on distribution deals with Netflix (s nflx) and others.

HBO sits atop the premium cable network food chain, meaning that it has the most to gain if viewers start to realize the value of TV Everywhere services and decide to sign up for those services. Of course, it also has the most to lose, since it’s placing all its bets on TV Everywhere for reaching consumers on digital platforms.

And since 86 percent of HBO’s revenues come from cable subscribers paying a premium to use the service, it would need those revenues to increase 10 percent or more to make up for passing up on a Netflix deal worth $250 million. If the trend of cord cutting continues — or worse, if consumers begin cord shaving, keeping their cable service but dropping expensive premium cable channels and extras — HBO could see its efforts to boost revenues fail.

That said, doing a deal with Netflix is not necessarily a saving grace, and it could have adverse effects on a cable network’s ability to increase the fees it receives from more traditional channels. Starz’s streaming deal with Netflix — through which it was dreadfully underpaid — surely puts a limit on the amount that the network can expect to receive from pay TV operators. And Epix, which offered a TV Everywhere service before it was even called “TV Everywhere,” has had difficulty finding cable distribution ever since cutting a deal with Netflix.

But giving content to Netflix doesn’t have to be an all-or-nothing proposition for cable providers. Over the past several years, many cable networks have found ways to make back-catalog streams available through Netflix, while also boosting the amount that they receive from cable distributors.

Disney (s dis), for instance, has negotiated a series of retransmissions deals with cable providers over the course of the last few years, including some that make its content available on-demand on their TV Everywhere portals. At the same time, it also recently struck a deal with Netflix to make ABC and Disney Channel shows available to its streaming subscribers.

At the end of the day, it’s not that cable networks shouldn’t pursue TV Everywhere deals and boost the fees they collect from cable companies and IPTV providers; it’s that they should also have a strategy for alternative distribution deals as well.