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HBO Still Fighting Standalone HBO Go Product
Fear of Evolution Isn't a Business Model
by Karl Bode 09:21AM Thursday Jun 07 2012
HBO hasn't exactly warmed to the broadband-driven Internet video revolution. Over the years they've been accused of poisoning copies of their TV shows available for download via BitTorrent, petitioned the FCC to make DVR recording of subscription video-on demand illegal, and even hinted at possibly suing Slingbox for allowing the re-transmission of their content. In early 2010 the company finally revealed their Internet video service HBO Go, but hid it behind a paywall, requiring that consumers have both a cable subscription and a subscription to HBO.

Two years later and "Game of Thrones," HBO's adaptation of George R.R. Martin's fantasy series, is officially the most pirated television show -- possibly 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.

Responding to a fan campaign to offer HBO Go as a standalone service (dubbed "Take My Money, HBO,") HBO this week insisted that a standalone service just wouldn't be profitable enough. The company's Twitter account directed readers to an article by Patrick Lawler over at Techcrunch that claims a standalone HBO Go just wouldn't work:
quote:
“What would happen if HBO no longer had the pay-TV industry’s marketing team propping it up all the time? The results would be disastrous, and there’s no way that HBO could make up in online volume the number of subscribers it would lose from cable. Which is why, even though some users would actually pay more for access to HBO GO without all the other cable channels, you won’t see it show up as a standalone service anytime soon."
As of March, HBO served 33.2 million subscribers. As of April, much younger Netflix had 29 million subscribers. It's just kind of assumed that HBO couldn't making a killing in offering a volume product, because they'd take such a hit in direct support and billing. However, many companies obviously succeed on this front every day, and the reality is the company's executives -- whose fortunes are tied to the legacy business interests at parent company Time Warner -- don't want to try. HBO may be bolstering some subscribers through cable marketing, but how many are they losing thanks to cable's total unwillingness to compete on price?

One way to make sure such an idea never succeeds is to never attempt it.

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Os

join:2011-01-26
US

Aren't the Cablecos Giving HBO Away?

That was Comcast's excuse to remove the HBO HD feeds in many areas. They tried claiming that as many as 1 in 3 were receiving HBO as a promotional toss-in.

So if that's the case, defending the cable model may be propping up HBO's subscriptions, but is it really benefitting the cable companies as much as Lawler wants us to believe?

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

The Joys of Vertical Integration

As the summary points out, HBO is owned by Time Warner. There is no way they will ever allow for any access to HBO that bypasses a cable or satellite provider because that will be one less reason to purchase the cable TV service offered by Time Warner Cable.
--
Romney 2012 - Put an adult in charge.
Os

join:2011-01-26
US

2 recommendations

Re: The Joys of Vertical Integration

Time Warner Cable was spun-off from Time Warner. It's a separate company now.

TWC was very late to receive HBO GO.

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

Re: The Joys of Vertical Integration

said by Os:

Time Warner Cable was spun-off from Time Warner. It's a separate company now.

My bad. Thanks for the clarification.
--
Romney 2012 - Put an adult in charge.
Skippy25

join:2000-09-13
Hazelwood, MO

1 recommendation

That could be, but who owns the stock and sits on the boards.

You need to look into the stake holders before you can claim they are separate entities.

Thats like saying our congress is separate from corporations and yet you look at their career funding and their politics you will see the stake holders are the corportations, thus they are one in the same.
Sammer

join:2005-12-22
Canonsburg, PA

Re: The Joys of Vertical Integration

said by Skippy25:

You need to look into the stake holders before you can claim they are separate entities.

While I don't know who the major stake holders for either are they do seem to be considerably more split than the supposedly separate Viacom and CBS.

buzz_4_20

join:2003-09-20
Limestone, ME
Reviews:
·ObiVoice
·Pioneer Wireless

I'm not dumb, but I still don't understand

1. Expand Customer Base
2. Charge $9.99 a month for HBO Go
3. Sell Direct to Consumer

Where's the can't make a profit part come in.

There are tons of people that would buy this. After paying for cable and internet most don't want the added cost of HBO.

There are many that don't have cable and don't want to pay all outdoors for the cable package just to add more on top to watch a few shows on HBO.

Really, I don't understand the logic here.

If the legal method is easier than piracy and reasonably priced it will work.

Look at hulu+ that is way easier than have to torrent a show, then find a way to play it on your tv. All you have to do is pick up your remote and it works.
Os

join:2011-01-26
US

1 recommendation

Re: I'm not dumb, but I still don't understand

The real question here through all this is what the cable companies are paying HBO per subscriber.

We've seen those charts that outline the subscriber fees for each cable channel, but they never show HBO, Cinemax, Showtime costs.

Considering how many promotions exist for "3/6/12 months free" of these channels, it suggests to me that there is a massive markup that the people who pay retail subsidize the promos, and that there's so much margin that they can handle that business model.

Here, Atlantic Broadband charges $19.95 per month for HBO. That does not include any West Coast feeds, does not include HBO Comedy or HBO Zone, and only includes HBO HD and HBO2 HD (which is more than any Comcast subscriber in MD can say they have). However, even if I paid for HBO (I don't), I would STILL not receive access to HBO GO as Atlantic Broadband doesn't have a deal with them. That's the real injustice. I can be a paying customer and STILL be locked out of the content.

But I think it shows the real rate HBO gets of that is maybe $5-$6 month, and considering the cost of Netflix, I could easily see charging $10 for the movie and original show library as not only being popular, but profitable, moreso possibly than the cable model.

buzz_4_20

join:2003-09-20
Limestone, ME

Re: I'm not dumb, but I still don't understand

Very True. I'm sure the CableCo is kicking plenty of cash towards them.

I don't think they see just how many customers that they could have by opening up to everyone.
Os

join:2011-01-26
US

Re: I'm not dumb, but I still don't understand

You misunderstand me. I totally agree with you.

My point is that the real price of HBO that the cablecos pay them is substantially less than that retail price point due to all the promos.

It would just be great to have the transparency of the real cost of the premium movie channels compared to the cable channels. I'm not entirely convinced HBO gets more per subscriber than ESPN.

buzz_4_20

join:2003-09-20
Limestone, ME

Re: I'm not dumb, but I still don't understand

Slowed down, re-read...

I see your point clearly.

That makes even less sense for them. They would get 100% of the sales instead of whatever they get for the CableCo during negotiations.
elray

join:2000-12-16
Santa Monica, CA
Reviews:
·Time Warner Cable
·EarthLink

Re: I'm not dumb, but I still don't understand

said by buzz_4_20:

Slowed down, re-read...

I see your point clearly.

That makes even less sense for them. They would get 100% of the sales instead of whatever they get for the CableCo during negotiations.

100% of the sales and 100% of the headaches, dealing with consumers, as well as having to deal with IP delivery issues.

Its a lot easier for the boardroom to understand bulk contract sales at $60/household-year via cable and satellite, than try to calculate the rents from 10 million individual monthly IPTV subscriptions.

buzz_4_20

join:2003-09-20
Limestone, ME

Re: I'm not dumb, but I still don't understand

So, keep digging in heels leaving potential consumers with no legal alternative to get your content... Seems like a sustainable model.

88615298
Premium
join:2004-07-28
West Tenness

Re: I'm not dumb, but I still don't understand

said by buzz_4_20:

So, keep digging in heels leaving potential consumers with no legal alternative to get your content... Seems like a sustainable model.

Yep a cord cutter is not going to pay $1000 a year to get HBO if he can just pirate the show even if he knows it's wrong. Most of the same "pirates" WOULD pay say $15 a month for HBOGo. $1000 year = worth pirating. $180 a year = not so much.
elray

join:2000-12-16
Santa Monica, CA
Reviews:
·Time Warner Cable
·EarthLink
said by buzz_4_20:

So, keep digging in heels leaving potential consumers with no legal alternative to get your content... Seems like a sustainable model.

Its quite sustainable.
The average American Household is not going to cut the cord.

Until broadcasters and networks buy out the caps and throttling and assure us of 2K streaming speeds, until the IPTV / OTT STB can be purchased at Best Buy cheap and doesn't have Moto-like bugs, and until the audience affirms its willingness to pay MORE for ala-carte IP delivery, HBO et al will go with the business model they know.
mogamer

join:2011-04-20
Royal Oak, MI
said by Os:

The real question here through all this is what the cable companies are paying HBO per subscriber.

We've seen those charts that outline the subscriber fees for each cable channel, but they never show HBO, Cinemax, Showtime costs.

Considering how many promotions exist for "3/6/12 months free" of these channels, it suggests to me that there is a massive markup that the people who pay retail subsidize the promos, and that there's so much margin that they can handle that business model.

Here, Atlantic Broadband charges $19.95 per month for HBO. That does not include any West Coast feeds, does not include HBO Comedy or HBO Zone, and only includes HBO HD and HBO2 HD (which is more than any Comcast subscriber in MD can say they have). However, even if I paid for HBO (I don't), I would STILL not receive access to HBO GO as Atlantic Broadband doesn't have a deal with them. That's the real injustice. I can be a paying customer and STILL be locked out of the content.

But I think it shows the real rate HBO gets of that is maybe $5-$6 month, and considering the cost of Netflix, I could easily see charging $10 for the movie and original show library as not only being popular, but profitable, moreso possibly than the cable model.

Like you mentioned, taking into account all of the free and other promos (Dish was offering all of it's premiums at half off for 6 months) plus the free weekends every other month that HBO/Cinemax have. There must be a tremendous mark-up for the pay-tv providers. I bet a $9.99 stand alone HBOGO would be just as, if not more profitable per sub, for HBO as the current model is.

The biggest problem is that most isp's also sell tv packages. Those guys wouldn't stand still with losing one of their big cash cows.

And boy, is Atlantic Broadband ripping people off. That's the most expensive pricing I've seen for HBO. And you're getting the bare minimum too.
Os

join:2011-01-26
US

Re: I'm not dumb, but I still don't understand

The only suites of premium channels we get the full slates of are Starz/Encore, and that's because they're included with the Digital Plus package (The only digital cable package ABB has).

For Cinemax, we only have Cinemax, MoreMax and ActionMax and it's an additional $16.95 per month from the HBO.

We only have Showtime, Showtime 2, Showtime Showcase, Showtime Extreme and Showtime Beyond, which is all Comcast Mid-Atlantic carries too.

Atlantic Broadband is merely Charter's leftovers that they deemed non-strategic in 2004. All of the territories in MD and Western PA were deemed non-strategic by AT&T when they acquired TCI, and dealt to a shell company that was purchased by Charter within 6 months. We did get D3 speeds last week available here, and those are competitive (20/2 for $54.99, 40/3 for $69.99).

But there's a reason ABB is for sale. And I didn't even mention all the cable channels we can't get, including one of our in-market regional sports networks, Comcast SportsNet Mid-Atlantic.
Zoder

join:2002-04-16
Miami, FL
Comcast's appointment guarantee says that if the tech is late you either get a $20 service credit or 3 months free of a premium channel.

So $6 a month cost to the cable company sounds about right.
keenan424

join:2003-01-13
Santa Rosa, CA
said by Os:

The real question here through all this is what the cable companies are paying HBO per subscriber.

As of about a year ago, HBO receives $6 per subscriber from their carriers. Starz charges $2.50 while Showtime charges $2.00.
Os

join:2011-01-26
US

Re: I'm not dumb, but I still don't understand

Now is there any sort of discount to the providers for not providing all the feeds? If there isn't, then why don't they? It's not like additional SD channels eat up any significant bandwidth.

It looks like my intuition was right. There is no doubt knowing that $6 figure that a Netflix-like HBO standalone service can make money, and can be opened up to a wealth of new customers. The days of needing the middlemen (cablecos and satellite) are over, the only things holding us back are not the technology, but the protection of legacy revenues both through regulations, caps/overages and sweetheart deals.

I actually think the one who could shake things up might not be HBO, but Epix. It's got the backing of Viacom, and doesn't receive the advantages of carriage. Comcast, TWC and DirecTV won't touch it. It's also got a large online component, and I believe some content sharing still with Netflix.

Should it exist? Probably not. It only came to be due to the CBS/Viacom split (Showtime going to CBS). But to expect the rascal in the room to be the industry standard might be too optimistic.
Sammer

join:2005-12-22
Canonsburg, PA

1 edit

Re: I'm not dumb, but I still don't understand

said by Os:

I actually think the one who could shake things up might not be HBO, but Epix. It's got the backing of Viacom, and doesn't receive the advantages of carriage. Comcast, TWC and DirecTV won't touch it. It's also got a large online component, and I believe some content sharing still with Netflix.

Should it exist? Probably not. It only came to be due to the CBS/Viacom split (Showtime going to CBS). But to expect the rascal in the room to be the industry standard might be too optimistic.

Considering that CBS and Viacom are still controlled by the same Redstone family that controlled them when they were together I doubt the split had much to do with Epix. It probably had more to do with Showtime's inability to renew contracts with Lionsgate and MGM who are Epix joint venture co-owners with Viacom.

skuv

@rr.com
said by buzz_4_20:

1. Expand Customer Base
2. Charge $9.99 a month for HBO Go
3. Sell Direct to Consumer

Where's the can't make a profit part come in.

Where's the rest of your cost analysis on this? Do you know the costs involved to make nearly every HBO show and multiple movies available for streaming?

Your list is a lot more simplified than it should be.

Maybe they could make a profit. But your list certainly doesn't show how.

Simba7
I Void Warranties

join:2003-03-24
Billings, MT

Re: I'm not dumb, but I still don't understand

said by skuv :

Do you know the costs involved to make nearly every HBO show and multiple movies available for streaming?

As simple as copying a file to a server. It's not that incredibly hard.

Most of the files are digital anyway when the shows are being transmitted to the carriers. Do you think any of the providers still use video tape?
ISurfTooMuch

join:2007-04-23
Tuscaloosa, AL
There may be more than price-per-sub going on here. Yes, HBO stands to make more selling HBO Go directly, but they're probably afraid of the backlash from the cable and satellite companies if they do that. First, we assume they could make more per sub going the direct route, which they likely could, but it's also important to note that those of us who post here are far ahead of the curve in terms of being broadband-savvy. Most people still get their TV through cable or satellite. That means the market for direst sales, while growing, still isn't that big yet. You then also have to consider how the cable companies would respond. They'd likely say that offering this programming direct is lowering HBO's value, so the cable and sat companies would want to pay less per sub. Essentially, that's the argument Dish is making with AMC, and you can believe that the Time Warner execs are paying attention.

I also think there's another issue at play: if HBO offers its programming direct to broadband subs, it would serve to validate that kind of delivery model. Once that happens, the perceived barrier to entry into delivering first-run TV shows via broadband just got way lower, which means others may try, skipping cable and satellite altogether. That's bad for HBO because they'll then have to compete against these new entrants. Granted, newcomers aren't going to have the same level of programming, at least not at first, but they'll still chip away at subs. And, if you're a programmer, which would you prefer: a walled garden controlled by a company you've done business with for decades, where you're already established and face limited competition, or a more open ecosystem, where you can sell directly but are open to competition from anyone else who can set up shop?

fifty nine

join:2002-09-25
Sussex, NJ
kudos:2
said by buzz_4_20:

1. Expand Customer Base
2. Charge $9.99 a month for HBO Go
3. Sell Direct to Consumer

Where's the can't make a profit part come in.

Make it $20-$25/month. HBO will probably want that kind of number.
keenan424

join:2003-01-13
Santa Rosa, CA

Re: I'm not dumb, but I still don't understand

They will, Time Warner have already stated that for Netflix to carry HBO content the Netflix subscriber cost would need to go up to about $20 per month(for streaming alone).

88615298
Premium
join:2004-07-28
West Tenness

Re: I'm not dumb, but I still don't understand

said by keenan424:

They will, Time Warner have already stated that for Netflix to carry HBO content the Netflix subscriber cost would need to go up to about $20 per month(for streaming alone).

And I would pay $20 for Netflix if it had current season HBO stuff and/or more newer movies. Unfortunately Netflix has seemed to have gotten comfortable with just offering it's "nothing but old shit" catalog. Raise the price to $10 offer a "premium" tier for $10 more then use that extra cash to offer newer content.
elefante72

join:2010-12-03
East Amherst, NY

It breaks the channel model

Folks,

HBO is delivered exclusively through the channel meaning they rely on others for sales, marketing, billing, promos, etc. HBO will give kickbacks to assist in these, but for efficiency sake it makes much more sense in the 1980's to have the sales force be your channel because they are selling a fungible resource (only in the last decade has HBO had any real marked shows.

The issue is that once a channel gets ONE good show, they equate that to the entire channel or distribution being worth more than it is. Look @ AMC. I never in my life tuned in. Now they have Mad Men and they want to bend over distributors for it. Guess what it's still cheaper to buy by the episode or torrent (even cheaper).

Now HBO has to find a way to disrupt its 100% channel model (that is not easy to do), because if they start selling directly to the consumer they are now putting in jeopardy the channel's model. So a response may be to reduce free month packages, or to not push HBO and say push some other channel or package (Spanish) where there is more margin and no channel competition.

The only way this works initially is to say charge retail, maybe $20 a month which is way more than the $13 verizon wants to charge me. Assuming that Verizon gives $5-$6 to HBO and $3 is the cost basis, HBO would have to expect that for every 3 cable people that leave, they would have to pick up one retail person to make up for it.

And unfortunately they know that the $20 price point is about 3x too expensive (margins of 40% are fat guys), so they have to find a way to balance that and still grow. Fat legacy companies are expected to grow forever, and when they don't wall street punishes them.

So eventually a new player comes along to rustle the cart and away we go. These guys have had 40 years of uninterrupted bliss, don't think they are going to give up so easily. They will have to be ejected from the party.

Media companies are loath to try new distribution models, so competitors will:

1. Music - OMG, napster, hello itunes. What's an album?
2. Videos - By by MTV, hello youtube, vevo
3. Books - Hello Amazon-Apple-Neighborhood library, by everyone else. The model still will need to flush out. I love my library--they deliver my books to my kindle....for $0 (well I pay taxes)
4. Textbooks -> This one will be huge. TBD, but these guys will implode.
5. Laptops -> Bye -? tablets, phones Chromebook -> Bye
6. Nokia, RIM -> Bye
7. Sony -> Bye bye. The should have used Apples proprietary model better. They don't even make their own TV's anymore.
8. Movies -> Netflix, et.al. This one is not done yet. Fate of theaters still to be decided, but I see destinations popping up.
9. Newspapers -> Need I say more. The internet and non leftist liberals.
10. PC's -. The cloud, ipad
11. TV - Who to watch for: Streamers, Console makers, TV makers, P2P -> There is an all out assault on this. They will NOT win.
12. Sports -> The most Roman of all. Every house pays at least $1000 directly or not to the circus.

88615298
Premium
join:2004-07-28
West Tenness

Re: It breaks the channel model

said by elefante72:

Media companies are loath to try new distribution models

30 years ago the they tried to kill the VCR. Now these same companies would be dead in the water if not for the home video market. They should be lucky the failed in their attempt. Why do they never learn they are ALWAYS wrong about new technology killing off revenues. EVERYTIME they have been wrong.

TV was going to kill off movies - WRONG

Cable was going to kill of broadcast networks - WRONG

VCRs were going to kill of both TV and movie revenues by encouraging piracy - WRONG

So when they say the internet will kill off revenues why should believe that based on their previously incorrect predictions?

88615298
Premium
join:2004-07-28
West Tenness

Stupid logic

“What would happen if HBO no longer had the pay-TV industry’s marketing team propping it up all the time? The results would be disastrous, and there’s no way that HBO could make up in online volume the number of subscribers it would lose from cable. Which is why, even though some users would actually pay more for access to HBO GO without all the other cable channels, you won’t see it show up as a standalone service anytime soon."

Yes because pay TV would no longer sell HBO. There would be MILLIONS of people still interested in HBO via pay TV. If say Charter ( my cable company ) gave up selling HBO, then guess what, DirecTv and Dish Network would suddenly get tons of new customers from my area. Any pay-tv company that stopped selling HBO would be stupid.

Why does HBO need pay TV to "advertise" it? No one heard of HBO? It's only been around for 35+ years. It's sad that the morons in charge of HBO don't get it yet. They are losing MILLIONS of $$$$$$$. Maybe when my special runs out I''ll just dump cable completely and just use a relatives login to get access to HBOGo. Then HBO you get NOTHING form me when you could have gotten SOMETHING. Forcing people in an expensive cable package when they clearly have no desire for one is not the way to get or keep customers.

I wonder if Game Of Thrones would still be the most pirated show if HBO offered HBOGo separately and also offered current season episodes for sale at Amazon and ITunes? I suspect the amount of piracy for that show would drop significantly. It would drop even further if they didn't decide to charge $4 per episode in HD.
Os

join:2011-01-26
US

Re: Stupid logic

And also because of the consistently rising cost of cable TV and the stagnant economic growth, what do you think the first thing to go in the cable package is?

It's the HBO subscription.

As for the people saying that it would complicate things to have programmers handle the delivery and servers, they've already been doing it for HBO GO. The only difference is to remove the authentication for the cable/satellite subscription and go to the account solely. They may need some server upgrades for capacity, and they may want to consider doing live streams of the HBO channels (a la WatchESPN, wouldn't that be sweet?), but technologically, there wouldn't be that many expanded costs associated with it as compared to the walled garden, IMO.

ITALIAN926

join:2003-08-16
kudos:2
Reviews:
·Verizon FiOS

Screw you thieves

Poisoning their shows that are illegally downloaded?! I think thats a GREAT idea, and they should do more of it. Shit, if Im in charge, I release movies with very low volume, and right smack in the middle of it, send out an outrageously loud BOOM to blow out speakers. Id insert soft-porn right smack in the middle of fuzzy movies. LOL

Great job HBO !! Thieves are SHIT human beings.

••••

gballer

@reyrey.net

well

I would gladly pay HBO for go service for my Game Of Thrones and True Blood but they are stupid so yeah I'll just hang out at my buddies house once a week and watch it over there for free..

Dumb asses!

not

@comcast.net

...

And ESPN does the same thing with their WatchESPN app. They require broadband from a supported carrier provider before you can use the app. Even then, half of the videos won't play properly until the app is restarted, etc. It's a POS way of doing things and these companies are double-charging us to watch the same content and the FCC doesn't do shit about it. ESPN increases Comcast's fees to allow their users to use WatchESPN when they've already charged them for allowing their users to use the website or XBOX to see the same content. Comcast (or whatever carrier you have) then turns around the charges you more because they don't belive in absorbing the increased costs associated with bringing you these additional avenues of watching the same content.

The FCC needs to go after standalone media companies like ESPN, HBO, etc. and yank their rights to charge multiple times or whatever they want for the same broadcasted info that they only have to pay once to gain access to. It's bs and it needs to change. There's far too much ripping off of the consumer public going on in this country by large corporations run by rich bitch board members.
Richardhi

join:2011-03-14
Honolulu, HI

Fear of Evolution Isn't a Business Model

thats funny because im positive thats what LTE is said to stand for. Its not a business model it a rip off tactic