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Most New HBO, Cinemax Additions Were Just Free Trials
by Karl Bode 09:33AM Thursday Feb 06 2014
You might recall recently that HBO and Cinemax complained intensely about a recent NPD Group study suggesting they were losing subscribers. The premium cable operators protested by noting that the companies actually added 1.9 million subscribers on the quarter, two-thirds of those for HBO. Time Warner broke out the specific earnings for HBO this week for the first time ever, in order to highlight the fact that HBO generated $1.3 billion in revenue in the last quarter of 2013, and $4.9 billion for the year.

While certainly healthy earnings, also embedded in that report is the fact that the majority of those 1.9 million subscribers added by HBO and Cinemax were non-paying customers:
quote:
In 2013, HBO and Cinemax added almost 2 million subscribers in the U.S., which was the highest increase in 17 years, he said...But according to Time Warner, most of those subscriber gains for HBO and Cinemax in the U.S. were not “revenue-producing,” meaning the pay-TV affiliates kept 100% of the fees from subscribers for those services.
In other words, the customers were just testing out trials provided by cable operators. Meanwhile, Netflix continues to nip at HBO's heels, generating $1.2 billion on the quarter and $3.75 billion on the year, while adding subscribers at a much faster rate, adding 2.3 million actual paying customers on the fourth quarter. Remember when Time Warner boss Jeff Bewkes tried to brush aside Netflix, comparing it to the Albanian army? Good times.

This will ultimately end with HBO offering that stand alone streaming broadband platform everybody wants but Time Warner refuses to provide (for fear of cannibalizing existing revenues generated by cable partnerships), but not without a few more years of denial first.

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Camelot One
Premium,MVM
join:2001-11-21
Greenwood, IN
kudos:2

I can see it now.......

HBO/Cinemax will continue to deny users the stand alone product, which will drive their subscriber count further and further down, until they have no choice but to do something about it. But when that day finally comes, they will have pushed away so many subscribers that no one is left to sign up. At which point they will say "See, we told you no one wanted this online only product!"

And then they will blame it all on piracy.

ITALIAN926

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

Re: I can see it now.......

They will shift to online streaming when its no longer profitable, or at least trending in that direction. Im sure their CEO's and boards can read an arrow on a chart.
Tired of people using the illusion that pirates will no longer pirate, if "affordable" options were available. Most of that scum will pirate regardless of the price. "Affordable" has a great variety of meaning, doesnt it?
Regardless as to prices , people will always seek to piracy to drive the prices down to, NOTHING. Thats what happens when product competes with FREE. During a Riot, you dont see too many people stopping at the register to leave money, aye?

I am SOOOOOOOOOOOOO looking forward to the day when actors step out of character to endorse Tide Laundry Detergent. It'll be a fun day when our musicians sing nothing but commercial jingles. Thanks Pirates !

tshirt
Premium,MVM
join:2004-07-11
Snohomish, WA
kudos:4
Reviews:
·Comcast
said by Camelot One:

But when that day finally comes....

That day may be a long way off.
HBO generated $1.3 billion in revenue in the last quarter of 2013, and $4.9 billion for the year. where as piracy generated Zero income and substantial expenses.

ITALIAN926

join:2003-08-16
kudos:2

Re: I can see it now.......

Revenue or profit tshirt?

tshirt
Premium,MVM
join:2004-07-11
Snohomish, WA
kudos:4
Reviews:
·Comcast

Re: I can see it now.......

that was revenue
Operating income was $413 million compared to $80 something for Netflix give HBO 5 time the margin. »variety.com/2014/tv/news/netflix···1087683/
This is a golden goose and they won't give it away.

ITALIAN926

join:2003-08-16
kudos:2

Re: I can see it now.......

Thats an excellent point. When HBO starts to see their profits dwarfed by Netflix, then they will shift to streaming. Netflix is available in all the same areas as HBO.
rahvin112

join:2002-05-24
Sandy, UT

Re: I can see it now.......

The problem is that by the time the numbers make the shift Netflix will have made so much progress that HBO will be left in the dust. Hastings is right about one thing, Netflix has to become a better HBO before HBO can become a better Netflix. HBO could gain the lead by making the shift, but they will undoubtedly wait too long while they suck on the cable tit. I don't give it 5 years before cable/sat begins to see significant long term subscriber losses. Once that happens there is no going back, either cable/sat embrace Netflix style consumption or they lose all their subscribers to Netflix.

The kink here for Netflix is that HBO who has more money, resources and content and who already has the digital distribution system in place could jump out and take over Netflix's business. In 5 years HBO won't have that lead in content or revenue and HBO won't have the leverage they do now. The funny thing is that I have no doubt HBO could charge $10 a month (they get about $6 or less from the cable/sat companies) and triple subscribers just by making it possible to purchase HBOGO separate from cable/sat. They could land an almost killing blow on Netflix, but because they are owned by Time Warner they aren't going to do any such thing until long after Netflix has ate them for lunch. The price increases and fear of IP distribution is going to end them all and Netflix and copycats are going to dominate media consumption before 2020.
elefante72

join:2010-12-03
East Amherst, NY
Probably true. My FiOS renewal last month has HBO free for a year. I like it for free, but not $18. I could tolerate up to $10, but that is it. There are always promos, and if you miss a show you can always watch it on HBOGO at a later time.

DatDude

@comcast.net

Horrible Article

1. Time Warner is ONE company. Hardly a great sample size.

2. Of course most customers START with free HBO. Just like most customers START with a free 30 day trial of Netflix. What really matters is how many customers stay with the service after it stops being free.

Toguro

join:2003-10-23
Chicago, IL

Re: Horrible Article

Time warner owns HBO they would be the ones with the financial numbers behind the channel.

DatDude

@comcast.net

Re: Horrible Article

I know that, I just misread the article and thought they were only referring to Time Warner customers that added HBO. It still doesn't take into account the number of customers that kept HBO after their free trials vs the number of customers Netflix keeps after their free trials.
itguy05

join:2005-06-17
Carlisle, PA

Too Expensive

$15/mo for HBO? No thanks. I'll take $8 for Netflix FTW, Alex. After HBO cancelled The Sopranos and Big Love I lost interest. Not interested in Game Of Thrones or their other shows so Netflix is better for us.

And I really think they should think long and hard about a standalone package....

Mr Guy

@charter.com

Re: Too Expensive

said by itguy05:

$15/mo for HBO? No thanks. I'll take $8 for Netflix FTW, Alex. After HBO cancelled The Sopranos and Big Love I lost interest. Not interested in Game Of Thrones or their other shows so Netflix is better for us.

And I really think they should think long and hard about a standalone package....

Stand alone HBOGO will not be cheaper than $15 a month. And Netflix can't keep charging $8 a month forever. They need revenue to actually get more newer content. Of course I don't se why it has to be one or the other. If one cuts the cord why not get both. Still cheaper than cable/satellite.
dishrich

join:2006-05-12
Springfield, IL

Just as some of us said

EXACTLY as others & myself previously posted:

»Free vs pay

DatDude

@comcast.net

1 recommendation

Re: Just as some of us said

You're also delusional if you think Netflix isn't counting their 30 day free trial "customers"

Corehhi

join:2002-01-28
Bluffton, SC

HBO feeling the heat

Netflix has shaken things up and now that HBO is getting defensive it shows. All a good thing for a cord cutter.
elray

join:2000-12-16
Santa Monica, CA

NPD Credibility

NPD seems to consistently get it wrong.
rahvin112

join:2002-05-24
Sandy, UT

Re: NPD Credibility

Actually, given that the increase in Subs were all free trials the original NPD report appears to be correct.
rody_44
Premium
join:2004-02-20
Quakertown, PA
Reviews:
·Comcast

3 edits

netflix doesnt compete with hbo

Its only here on dsl reports that anyone believes netflix competes with hbo or cinemax. Hbo competes with showtime and cinemax. The people that think of HBO and netflix is limited to dsl reports readers. The content isnt anything near the same. Netflix is going to have series that ended two years ago and movies that are way past there prime. Hbo is going to have present series showed on hbo and recent movies. That being said i subscribe to netflix and showtime. And wtf netflix doesnt even have the last season of breaking bad yet which ended close to a year ago. Not to mention i wanted to watch six feet under which i would have thought since that ended four years ago or so they would have had by now on netflix. I really think if it wasnt for the fact about 4 other families use my netflix subscription i would dump them at this point. HBO was dumped years ago when they stopped having any compelling series to watch. Series like the sapranos and six feet under. Series i never even expected to get with netflix or at least for a few years till netflix got around to spending the money to air. The new series that it seems moved to showtime.