HBO Still Trying Hard to Justify Not Giving You What You Want
Company Should Ignore the Math on Standalone Broadband Service
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
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
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:
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:
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.
said by N3OGH: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.
Just ask anyone who used to sell compact discs what iTunes has 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.
| |intellerSociopaths always win.
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!"
Re: well they are trialing this in Scandanavia
said by inteller: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'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 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.
Re: well they are trialing this in Scandanavia
said by inteller:Correct, Internet video is not there yet in terms of revenue or profit.
internet video is not there? wtf? don't tell Netflix and Hulu that.
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.
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.
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.
New York, NY
Re: Well it's not just HBO
said by elefante72: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.
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.
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.
Re: Speaking of trying to justify things...
said by ctggzg: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.
Funny how people try to use a company's business model to justify stealing. The anti-authority, pro-piracy bias here is incredible.
| |said by rick0204: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.
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.