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HBO Still Trying Hard to Justify Not Giving You What You Want
Company Should Ignore the Math on Standalone Broadband Service
by Karl Bode 02:25PM Thursday Sep 13 2012
HBO's still trying desperately to justify avoiding a direct-to-consumer HBO broadband video service. After years of poisoning copies of their TV shows available for download via BitTorrent, petitioning the FCC to make DVR recording of subscription video-on demand illegal, and threatening to sue Slingbox for allowing the re-transmission of their content -- in early 2010 the company finally showed something vaguely resembling adaptation and revealed their Internet video service HBO Go.

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Unfortunately, HBO hid it behind a paywall, requiring that consumers have both a cable subscription, a subscription to HBO and an ISP with an HBO deal.

Two years later and "Game of Thrones," HBO's adaptation of George R.R. Martin's fantasy series, officially became the most pirated television show ever. One way to attack this would be to offer HBO Go as a less expensive standalone service that didn't require a small fortune and a cable subscription. However in typical entertainment industry fashion, HBO continues to refuse to actually try and compete with piracy, instead believing that if you just fight desperately enough to keep legacy business models in place and throw up enough paywalls, everything will just somehow work out.

They're of course concerned that if they offer a direct to consumer offering, they'll lose out on all the subsidies and business that cable operators are throwing their direction. Responding to a fan campaign to offer HBO Go as a standalone service (dubbed "Take My Money, HBO,") HBO recently insisted that a standalone service just wouldn't be profitable enough. Others have chimed in to state that HBO is right, and the numbers just don't work.

Techdirt however directs our attention to a new post by Apple-church-Minister-turned VC MG Siegler that argues by choosing the safe path and the math over innovation and risk, HBO is dooming themselves to obscurity:
quote:
Moore's statement about HBO is correct. The math is not in favor of selling HBO access directly to consumers. But if we're just thinking about this from a pure product perspective, I don’t think anyone would disagree that this is what we all want. HBO is choosing not to build the service we will love, they're choosing the short-term money. The safe bet. The math.

But if they don’t diverge from this path, it will lead to their demise. Innovation always beats math, eventually. That, you can take to the bank.
As Masnick at Techdirt adds, companies like HBO spend all their time on spreadsheets trying to predict when the precise time should be to switch gears and start innovating -- which wastes time better spent on actually innovating:
quote:
So they come up with spreadsheets and "models" that try to predict when the math says it's time to switch. And all of that time they're not innovating. But since the disruption is brewing in a much faster manner, and in a different spot than they really think it is, the time to switch is usually as soon as you realize the innovation is happening, not when the spreadsheet tells you to. It's not just about choosing "the safe bet" vs "the service we love." It's about how disruptive innovation guarantees that those who don't build for the markets of tomorrow, don't really have much of a market tomorrow.
Granted the one thing HBO has in their favor, that Masnick and Siegler don't really mention, is that the TV industry is simply dominated by legacy companies with an audience that seems just fine with a lack of innovation, partnered with bi-annual rate hikes for hundreds of unwatched channels. Until something truly kicks the TV industry in the digital posterior, HBO can afford to keep their heads buried in the sand. It's not like HBO's theoretical standalone service is being pre-empted by innovators, since the cable and broadcast industry works very hard (caps, licensing hikes) to keep those products from ever seeing the light of day.

The check will certainly come due for cable operators, HBO and others who think that walled garden protectionism is the height of innovation, but it's probably not going to be anytime soon.

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pnh102
Reptiles Are Cuddly And Pretty
Premium
join:2002-05-02
Mount Airy, MD

Disagree

The number of real cord-cutters is pitiful compared to the number of pay TV subscribers (125k vs. ~100 million).

I highly doubt that HBO is losing any sleep over not offering a standalone solution to people like me who cut the cord because we don't want to pay a ton of money for content.
--
Romney/Ryan 2012 - Put a couple of mature adults in charge.

N3OGH
Yo Soy Col. "Bat" Guano
Premium
join:2003-11-11
Philly burbs
kudos:2

Re: Disagree

HBO would be foolish to rest on their laurels. The halls of business are littered with others who made the same mistake. Polaroid, Kodak, GM (propped up only by government fiat, no pun intended), Nokia, RIM (not dead but certainly circling the bowl) & to a lesser extent Sony have all seen lofty heights only to subcombe to a lack of vision, a failure to innovate, and the failure to track market trends.

Are cord cutters a small minority right now? Certainly. In a down economy, with more options available every day it would be smart to cater to this growing sector of users.

Traditional cable service isn't going away, but change within the industry is inevitable given the alternate content delivery options people now have access to.

Just ask anyone who used to sell compact discs what iTunes has done to their business.
--
Petty people are disproportionally corrupted by petty power
tanzam75

join:2012-07-19

Re: Disagree

said by N3OGH:

Just ask anyone who used to sell compact discs what iTunes has done to their business.

Compact discs and iTunes? Well, the cable company is the compact disc. HBO is the record label. Ask the record labels what MP3 players have done to their business.

Innovation doesn't always increase the slice of the pie. Sometimes it transfers value irreversibly from the company to the consumer, or from one industry to another.

Kodak and Fuji, for example, spent a great deal of money in digital photography R&D. They held many of the seminal patents in digital photography. Fuji produced a digital camera in 1988, and Kodak wasn't that far behind at 1991.

The problem is that they could not find a matching business model. The bulk of the profit in film photography lay in consumables, not in the camera. The bulk of the profit in digital photography was in the camera. They weren't used to this kind of market -- and what's worse, they had to compete against the consumer electronics giants, like Canon and Sharp. Going from a collective 90% of the film market to, say, 20% of the digital camera market would have been an unalloyed disaster even if they'd managed to, as the saying goes, "remain relevant."

The reason that it's called the Innovator's Dilemma is that it really is a dilemma. You don't know in advance whether the brave new world will be more profitable than the old and tired one. Sometimes it is. Sometimes it isn't.

inteller
Sociopaths always win.

join:2003-12-08
Tulsa, OK

1 recommendation

well they are trialing this in Scandanavia

I'm sure those trials will go swimmingly well then they will slowly expand to the rest of Europe and eventually the US. They are going to trial this where their cable relationships are the weakest.
--
"WHEN THE LAUGH TRACK STARTS THEN THE FUN STARTS!"
silbaco
Premium
join:2009-08-03
USA

1 recommendation

Re: well they are trialing this in Scandanavia

said by inteller:

I'm sure those trials will go swimmingly well then they will slowly expand to the rest of Europe and eventually the US. They are going to trial this where their cable relationships are the weakest.

I don't think their refusal to offer standalone service has anything to do with being legacy and their launch in Scandinavia proves that. I wouldn't be surprised if their contracts with cable companies simply forbid it. HBO can't offer a service that they are not allowed to sell. They have to keep the cable companies happy. As much as internet blogs want to say otherwise, HBO needs serious money and serious money can only be made by big contracts with big companies. Cable companies.

I really don't think HBO could make enough money from HBO GO as a standalone service if they lost the money made by cable companies. Now in a few years, perhaps. But for now the internet video is not there.

inteller
Sociopaths always win.

join:2003-12-08
Tulsa, OK

Re: well they are trialing this in Scandanavia

internet video is not there? wtf? don't tell Netflix and Hulu that.
--
"WHEN THE LAUGH TRACK STARTS THEN THE FUN STARTS!"
tanzam75

join:2012-07-19

Re: well they are trialing this in Scandanavia

said by inteller:

internet video is not there? wtf? don't tell Netflix and Hulu that.

Correct, Internet video is not there yet in terms of revenue or profit.

You might, for example, take a look at Netflix's financial results last quarter. It's pretty bloody.

Hulu is privately held, so we do not know how much money it makes.

inteller
Sociopaths always win.

join:2003-12-08
Tulsa, OK

1 edit

Re: well they are trialing this in Scandanavia

Bloody? Netflix was profitable in Q2.
--
"WHEN THE LAUGH TRACK STARTS THEN THE FUN STARTS!"
mdlund0

join:2011-08-02
Lawrence, KS

A service that I might buy...

I might be willing to spend money on a stand alone HBO service... I do not and will not spend money on an HBO cable package. Instead of wasting my money to see repeat upon repeat of stale movies occasionally interrupted by a show (e.g. Sopranos, Game of Thrones, etc) that I want to watch, I just get those shows from NetFlix, and I'm patient enough to wait for that to happen (while others pirate). A stand alone service that gives me access to the content that I want, when I want it would be worth something to me. So, sure, take my money, HBO, if you're willing. You're not getting any money from me right now, and a stand-alone service might get you some. I'm watching your content regardless.

Mospaw
My socks don't match.
Hawaiian Jellyfish
join:2001-01-08
Mile High
kudos:1

I don't currently have HBO in any form...

...but I would probably pay a reasonable monthly fee for access to HBO Go's content as a stand alone product. They have some compelling shows.
apple4ever

join:2002-06-16
Lancaster, PA

Re: I don't currently have HBO in any form...

I'm the same. I don't have HBO, but I'd get HBO to go if it came with no ISP or cable requirements.
elefante72

join:2010-12-03
East Amherst, NY

Well it's not just HBO

One thing to recall is that there are like 4-5 companies that own all of the cable that we see, and that HBO is owned by Time Warner who not only owns HBO but a crapload of other cable channels AND TWC. Now even though they are separate legal entities, this makes no mind to reality in that they are both vested together.

HBO subscribes to the channel model, and if they break that then their channel immediately collapses. So to do this they need to charge a significant premium to what you could get with cable, and that means $16-$20/month and compensate said channel to offset their "losses" (meaning captured audience distribution).

But this is a disconnect. How many HBO shows are there to watch? Say I only like GOT. I can get that from itunes for $30 for as long as I want. Ok, thats less than $3/mo.

They can pull all of their content and play trickery, but if they were smart they offer the "library" at say $10/mo, and the going rate for a subscription to the new shows, say $30/year. Case solved.

For me I don't like any current shows, but I do like a lot of past ones, and I would pay $5 month to access old stuff but only if they included some value rather than their old library. For $7 at netflix or free w/ Amazon I get way more value. That's the problem, there is little economic value to a one off paywall.

They are so entrenched in the broadcast consumption model, nobody gave them the memo on you pay for what you watch. And just last month I had to rejigger my cablecard because now Verizon needed to add copy flags, which BTW was added for the HBO Politburo. So I had to waste 30 minutes of my time, and I don't even have HBO. They are busy adding DRM when I think that boat was proven to sail a long time ago in the music biz... Oh the arrogance.
jmr50

join:2000-05-14
New York, NY

1 recommendation

Re: Well it's not just HBO

said by elefante72:

One thing to recall is that there are like 4-5 companies that own all of the cable that we see, and that HBO is owned by Time Warner who not only owns HBO but a crapload of other cable channels AND TWC. Now even though they are separate legal entities, this makes no mind to reality in that they are both vested together.

Time Warner and Time Warner Cable have no more connection than Time Warner and Dish. I have no idea with "this makes no mind to reality in that they are both vested together" means, but they are two completely separate entities and have been for several years.
delltechkid

join:2004-11-09
Hermitage, TN

The math doesn't work?

How is that? They charge $15 per sub on cable and the cable co gets a cut. If they charge $15 per sub online without the cable co cut, how are they not able to make the numbers add up?

LightS
Premium
join:2005-12-17
Greenville, TX

Re: The math doesn't work?

You have to realize, if they do offer a standalone service, that they have to hire employees to support it. They have to also hire their own accounting/business employees to support the people who are curious, have issues, need to pay, etc. Not to mention, paying for servers needed, security for the sensitive billing information (which also will require more personnel) etc..

That being said, I still think they should offer it.
InvalidError

join:2008-02-03
kudos:5
On cable, HBO provides the programming stream(s) to the broadcaster and the broadcaster handles distribution to subscribers.

If HBO goes stand-alone over the internet, they will need to lease services from content distribution networks or build a content distribution network of their own.

So doing it themselves is not necessarily as obvious a choice as it may seem.
ctggzg
Premium
join:2005-02-11
USA
kudos:2

1 recommendation

Speaking of trying to justify things...

Funny how people try to use a company's business model to justify stealing. The anti-authority, pro-piracy bias here is incredible.
Chubbysumo

join:2009-12-01
Superior, WI
Reviews:
·Charter

Re: Speaking of trying to justify things...

said by ctggzg:

Funny how people try to use a company's business model to justify stealing. The anti-authority, pro-piracy bias here is incredible.

it may be, but what HBO is doing is just plain stupid. Give us a legal alternative, and many would use it. People want their content, and they will get it, legal or otherwise.

88615298
Premium
join:2004-07-28
West Tenness
said by ctggzg:

Funny how people try to use a company's business model to justify stealing. The anti-authority, pro-piracy bias here is incredible.

When the company itself says they'd rather put up with 25 million people illegally downloading Game Of Thrones than offer HBOGo as a stand alone product my sympathy for them no longer exists. So in this case I am not going to admonish anyone stealing HBOs content since they've basically endorsed it.
rick0204

join:2009-05-20
North Bergen, NJ

Love HBO GO but only if under $10.00

My cable company - Cablevision - was one of the last to sign on for HBO GO. I cancelled my HBO subscription years ago to go all Netflix. I recently tried HBO GO and I love it. The HD is much better then the live channels and the library is very good. I watched every episode of my favorite show again - "Six Feet Under". Some of the episodes I never watched in HD or at all. Unfortunately Cablevision wants $14.95 for HBO and HBO GO. That is just too much for the service, even when GOT is showing new episodes. A stand alone HBO GO for $9.95 would be perfect. The Roku community has been asking for this since the start of HBO GO. I love my Roku and would love to add HBO GO, but only if it is under $10.00.

FailOverflow

join:2011-02-23
united state

Re: Love HBO GO but only if under $10.00

And I'd love a brand new Porche 911 Turbo, but only for $13,000.

88615298
Premium
join:2004-07-28
West Tenness

1 recommendation

said by rick0204:

My cable company - Cablevision - was one of the last to sign on for HBO GO. I cancelled my HBO subscription years ago to go all Netflix. I recently tried HBO GO and I love it. The HD is much better then the live channels and the library is very good. I watched every episode of my favorite show again - "Six Feet Under". Some of the episodes I never watched in HD or at all. Unfortunately Cablevision wants $14.95 for HBO and HBO GO. That is just too much for the service, even when GOT is showing new episodes. A stand alone HBO GO for $9.95 would be perfect. The Roku community has been asking for this since the start of HBO GO. I love my Roku and would love to add HBO GO, but only if it is under $10.00.

It's people like you that is why HBO won't change. HBOGo if offered as stand alone would not be cheaper than the $15 cable charges. And really if you're not paying for cable, $15 is a good deal. Quit expecting something for nothing.

WireHead
I drive to fast
Premium
join:2001-05-09
Muncie, IN

No go HBO

I don't have HBO or HBO GO. If HBO GO was available without needing cable I would definitely sign up. Like it was mentioned before I'm not missing out on content. Provide me an alternative way that is legal and I will come. Otherwise pbbt...
--
Retired BBR Team Starfire Team Q III Host
Live by chance. Love by choice. Kill by profession.

Torkkkkkk L

@frontiernet.net

Some responses here are immediately suspect

Who would REALLY step up to defend HBO and decry "piracy" on this forum? Come on. How much do you get paid to do that?
macallah

join:2003-01-22
Wichita Falls, TX

Lowest HBO GO $31/month?

The cheapest way to get HBO GO that I know of is $31/month. Essentially a minimum package from Dish $14.99 (welcome pack) and HBO $16.
civicturbo

join:2009-11-08
USA

Ummmm

Jesus just buy a Monsoon multimedia vulkano Or a slingbOx and be done with It F@$k HBO's extra charge, have multiple peoPle in the house? Then connect the vulkano to you master bed settop. Charge? You can go cheaPer by buying a tivO premiere w/ lifetime and a cable card is usually only 3/month. Now you have EVERY channel you subscribe to OnTheGo and your whOle DVr library to boot!