How "Game Of Thrones" Pirates Could End A Golden Age Of TV

Illegal downloaders of HBO's wildly popular fantasy show could learn a thing or two from the Lannisters about paying debts.

Recently, with a tone of barely concealed glee, Forbes declared that HBO’s Game of Thrones was on its way to becoming the most pirated show of 2012. Piracy of premium cable shows has received more attention from bloggers since an amusing Oatmeal comic pointed out how hard they were to download legally earlier this year. Since HBO won’t make its shows available promptly on Netflix or Hulu, some argue, the channel is practically forcing fans to pirate its shows. As Forbes pointed out, "for the millions of Americans who don’t subscribe to HBO, or who may not even watch shows on a television, this means there is no legal way to watch Game of Thrones."

It’s a similar position to one taken by Reddit founder Alexis Ohanian recently. "I love paying for stuff," he insisted at Fast Company’s Innovation Uncensored event. Ohanian said he couldn’t get the show on the cable network's iPad app, HBO Go, because he’s not a cable subscriber. "There are so many people looking for an excuse to give money to support art in all of its forms," he said. "We as innovators need to do a better job price discriminating and making sure they can get access to whatever level they want to pay for it."

On the most basic level, Forbes and Ohanian are right: HBO’s decision to restrict the availability of Game of Thrones is one reason why it gets pirated so much. But the restriction gives HBO a business--and the wherewhithal to make shows like Game of Thrones in the first place. There’s a reason there’s nothing that good on network television.

No one likes paying for cable. But the rise of the pay-TV business model led to the revolution in quality we’re currently enjoying from HBO shows like Thrones, as well as basic-cable programs like Mad Men and Breaking Bad. Years ago, when channels only received revenue from advertising, they made shows to reach as many people as possible, whether viewers loved them or just tuned in because they happened to be on. Cable changed those incentives, rewarding the creation of shows viewers felt strongly enough to pay for (indirectly in the case of channels like FX and AMC). That made nuanced drama profitable on television--and the best television more sophisticated than film. Sometimes, you really do get what you pay for.

No one likes paying for cable. But the rise of the pay-TV business model led to the revolution in quality we’re currently enjoying from HBO shows like Thrones.

Shows like Game of Thrones cost big bucks. Each episode of the first season reportedly had a budget of more than $5 million. Most such shows don’t attract all that many viewers compared to cheaper mainstream programs like American Idol. And if Game of Thrones sounds like easy money, remember that it has to generate enough profit to make up for Rome and John From Cincinnati. If HBO sold every show by the episode right away, it would have to charge a premium for hits to make up for its inevitable misses.

There are those who argue that the future lies in cheaper content, available simultaneously on a variety of platforms. This doesn’t work so well in the present. Big-budget shows have better odds of capturing an audience, and they’ll inevitably make less money on advertising as more consumers watch them on DVRs. One shudders to think about product placement opportunities for a show like Thrones.

The idea that HBO’s exclusivity amounts to an outrage seems silly, since it essentially amounts to commerce: If you want it, you have to pay for it. Obviously, HBO sets its own terms--it sells content by the month, not the episode--but so does every other company, in some way. Beer isn’t sold in five-packs. And, of course, Thrones is available on iTunes a year after it airs. (I waited to buy it and I’ve managed to lead a fulfilling life.) As the online kids say, call the Waambulance!

Piracy certainly threatens HBO, to the extent that it offers consumers a way to cancel their subscriptions. But the greater threat is that executives would listen to advice from bloggers and make Thrones immediately available on iTunes. The $30 or $35 HBO would get for an entire season of the show just wouldn’t add up to much compared to the $15 or so per month it gets from subscribers. As Forbes says, HBO is certainly "missing out on a huge potential audience." But so is Mercedes-Benz, and no one suggests it should start making Hyundais.

Robert Levine is the author of Free Ride, which Businessweek found “timely and impressive” and the New York Times Book Review called “a book that should change the debate about the future of culture.” He has been the executive editor of Billboard and a features editor at Wired and New York, and he has contributed to Vanity Fair, Rolling Stone, and the New York Times. He attended Brandeis and Northwestern University’s Medill School of Journalism. He covers the culture business from New York and Berlin. Follow @RobertBLevine_ on Twitter.

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29 Comments

  • lukasz

    The business model of HBO is outdated.
    Each customer makes them only a couple of dollars.  Most of cable subscription goes to cable provider not to HBO.   Therefore to watch GoT one has to pay (I assume prices as I can't be bother to check) 40 dollars for cable plus 10 dollars for HBO.  Yet HBO only gets 5-7 dollars and the remaining goes to cable provider. To watch the show I would have to spend 50 dollars a month. 
    Not only that but I would have to watch it when HBO tells me to watch it.  Furthermore, it prevents people from watching the show who can't have the cable or HBO package even if they have the money and are willing to spend them.

    These days this kind of business has no place.  In era when I can watch the show when I want, either immediately or a month later, without paying a single cent, without being American a TV and its limitations is just simply obsolete.

    Millions of people pirated the show.  From every part of the globe.  Those people are not people who would subscribe to HBO because like me, they simply do not see the point of having a cable or even a TV, can't have the cable (it is not available in their country) or just can't be bothered to pay 50 dollars for 100 channels full of garbage.  Instead they would pay few bucks a month just to be able to watch the show (and others) if HBO gave them the chance.  Netflix, Amazon, their own subscription.  Otherwise.... they just pirate, and HBO doesn't get a cent.

    The TV of old, their business models need to go.  They have no right to exist in this century.

  • Hanzo

    "...or just can't be bothered to pay 50 dollars for 100 channels full of garbage." Lukasz hits it here.  I would be really curious what any given HBO subscriber really pays HBO for GoT content, but I doubt it is much.  What the media industries are afraid of is that they would be forced, were everything a'la carte, to gamble that they made something quality like GoT and not something stupid.  Lord knows they don't have a good track record.  IOW: how much of every dollar that a subscriber pays to HBO to see one or two shows goes to the myriad of crap otherwise on it and most cable channels (basic or premium).
    So HBO's refusal to sell content is really an attempt to force everyone to pay for all of their shows, not just GoT (or whatever you want).  The author's car metaphor does not hold water here.  Their inability to have the guts to let the market vote with their dollars means they must leave many customers willing to pay (but just for GoT) to either wait or find other means (pirating).  Perhaps a car metaphor could be to say that HBO is a company that rents a bunch of cars, some Mercedes and some Hyundaes and some garbage, but you pay only one price and never know what model you will get when you go to the garage on any given morning.  If they just rented each on it's own reasonable rate, some would go Mercedes, some would go Hyundae, and some of the cars would just sit, never being rented as they are bad cars that nobody wants to drive.  But then HBO would lose money on the cars that nobody wants, and that is what HBO is scared of.

  • BradleyHart

    There are many flaws in this model.  The first is that people who pirate the show are not cable subscribers.  My DVR provides no portability between my devices, only holds so many hours of programming and for only so long.  My wife prefers to watch programs after she has built up several weeks of shows while stretched on the couch, my son his iPad, I prefer up close and personal on my big computer monitor in comfortable my Aeron chair without anyone else around to bother me.  This is hard to do with DVR.  The second flaw is the assumption that a company loses money through piracy.  Most people who pirate media be it a TV show, Music,  or a Movie, weren't going to but the product in the first place, so you can't assume what they have done has actually cost you money.  More over unlike with traditional piracy, the pirates tell the world how good the product actually is generating popular positive buzz about the product which constitutes good word of mouth advertising.

  • Spencer Mead

    The entire premise is flawed here, it's assuming that "If HBO doesn't make these awesome shows, WHO WILL?!?!"

    which is kinda something the author mentions right away, which is that networks like AMC and FX, see that the game has changed and that a public that demands content immediately means that making such content available right away is the only way to avoid that content from being pirated.

    Long ago, many video game companies realized that making video games available for download does a multitude of things, first it frees them from requiring physical distribution, second it frees them from that cost, third it makes it easier to sell your product, because if I don't have to get in my car to get something, hooray for me, which is essentially what the internet has done to commerce and why amazon is making a killing right now because it understands that the service industry of to your door delivery is where we are now.

    Shows will continue to be made, of that have no fear, because first people want to be actors, directors and writers, second people want to be entertained, and third people will pay for it, the job of the entrepreneur is merely to determine how to get people to buy what he's got.  Whether or not HBO sees the sea change is their opportunity to miss.

  • cindyidaho

    I don't mind paying for watching it on line through Netflix, video on demand or other program., but they are waiting FOREVER to release it to other media.  

  • Justin

    I can't say I agree. Your math doesn't add up, and looks at only one alternative to paying for an HBO subscription over cable.

    Three replies:

    First, unlike AMC, HBO doesn't have an incentive to force people into watching its shows on the TV set. There is no advertising on HBO, so no money to be lost of the audience is distributed over several media.

    Second, you're looking at a price *per episode of each show* that people might pay on iTunes. Watching two programs with four episodes each per month would bring in a substantial amount of revenue, even if it's only for the portion of the year that those programs are on-air.

    Third, there are other business models besides an iTunes setup. How much of the $15/month that cable subscribers pay goes to HBO? How much goes to Comcast or Verizon? We know from a recent experiment (http://takemymoneyhbo.com/) that many people would pay between $5 and $10/month directly to HBO for web-only access to the network's programs. 

  • Andrew Schenk

    Hey, Hyundai has come along way, and it's not like Merc is the cream of the crop when it comes to reliability.. Oh, off topic. 

  • TewtsMcGee

    If it wasn't making money for HBO, why sign on for more seasons...oh, because they DO make enough money without "piracy" being a factor.

    As always, its not a lost sale if someone wasn't EVER going to pay for it, seen or unseen.

  • Ok_nords

    Terrible article.
    HBO is owned by Time Warner. Time Warner made 29 billion in revenue in 2011.

  • Jack_robber

    Smart solution? One HBO account split between multiple people. HBO allows it (must log in at separate times) and it's legal. But you have to have 1 friend who has HBO and work out what you own him/her. But... I know how hard it is to make friends with online access these days...

  • Dfhju

    worried about not making as much money surely they will be making more than they are if people get the option to pay for it rather than pirating it for free....

  • Douglas Radecki

    I find the logic behind the commercial argument flawed. HBO, as far as I know, does not run any commercials. I also agree w Jensen that the six pack analogy is completely flawed. 

    Second, HBO needs to realize that their current business model is not delivering an enjoyable user experience for the customer. Many of the comments have said how much they would pay for an episode of GoT, and I believe last I looked the average price was about $8 according to http://takemymoneyhbo.com/

    As Spotify has shown, you can get paying customers if you offer them a way to enjoy content and make it easier then pirating. So try again, Levine, next time you write some article realize there are plenty of examples that show how companies have successfully adopted to the new behaviors of their potential customers.

  • Jensen_G

    The 6-pack analogy used in the article is flawed. The issue is not paying monthly for HBO (I would do that no questions asked); it is being forced to pay for a basic cable package full of stuff I don't want to watch to have the privilege of being able to pay for an HBO subscription

    So, if we go back to the beer analogy, it's like being forced to buy a 6-pack of Budweiser every time I want to buy a pack of craft beer.  And just like with beer, there is no way I am ever going to buy Budweiser to get to what I want to drink! I will just look elsewhere.

  • Mayweather Romanov

    A breakdown of that $5 Million per show would be interesting. That's a lot of loot. Maybe the end user shouldn't always be the bad guy, pirate or not. 

  • John Morrow

    Just think of how many great shows HBO could make if it wasn't stupidly refusing to sell me something I'd really like to buy...

    I would happily pay $5 or even $10 an episode to download GoT.  It's that good a show.

    But because most of the rest of television is largely a vast wasteland, I don't have cable at all, let alone HBO.  And since even the cheapest cable package here in Ottawa, plus HBO, would run me upwards of $75, I'm pretty clearly not going to sign up just to watch ten episodes of Game of Thrones.  And I know I'm not alone in this.  I have a half dozen friends in exactly the same situation.

    What is perplexing about HBO is not that they don't release the shows online at the same time.  I understand that would be a bad idea.  But once the show is over for the season, say a couple of months later, after everyone who was willing to get HBO to watch it has had that chance, why on earth not make it available at some reasonable rate for people who are willing to pay to watch it online?

    By refusing to do this (the first season wasn't available online until over a year after it was actually shown on HBO) they are just pissing away money.  The Oatmeal comic has it exactly right...  They didn't make a cent off of me watching the first season of GoT, despite the fact that I would happily have paid them $50 or even $100 for the privilege.  

    I haven't pirated any of the second season.  Yet.  But if they don't make it available in some timely fashion, then I guess I'll keep my money grab the burned copies from a friend.  Multiply that by by thousands of people, and the revenue they are choosing to forgo is huge.

    Idiots.  Pure and simple.

  • Guest

    Incredibly naive analysis. Piracy exists whether you want it to or not, and business models will have to adapt to survive. The ease of access threshold has to be lower than the piracy route, and it just isn't right now.

    This article offers not even a suggestion of how problems of piracy ought to be remedied. It childishly proclaims that less financially lucrative models shouldn't be undertaken, because 'it's bad that the piracy is happening in the first place, so it shouldn't be'. What use is that argument to anyone? Go on, go and tell illegal downloaders that they ought not to be doing that, that'll help.

    It's also totally erroneous to suggest that since media with integrity is being produced under the current model, then it somehow couldn't be produced when the world changes.

    No, the new models may not be ideal in terms of getting revenue to content creators. But here in the real world, sometimes you have to accept a loss, and accordingly work towards the best result that is still viable. It's called damage control.

    This head-in-the-sand attitude wastes everyone's time. And the worst thing? The people in charge of the big media corporations are acting the same way as the writer of this article. They want to believe that an old model is sustainable when it's not, because 'they sure were some good times'. So they refuse to try to adapt. And that's the greater threat to content production.

  • jl05xi

    I don't think you can compare a luxury car and a premium channel just because they're priced higher.  There are alternative ways HBO can deliver their content, but there's no alternative way to deliver a luxury car.

    Why not offer cable subscribers $15/month for the channel, and NON-cable subscribers a higher premium? Say, $25? I'd pay that price for Game of Thrones.