“It’s not TV,” as they famous slogan says. “It’s HBO.” Yet you can’t access HBO without TV.
Last year, the popular cable network launched HBO Go, a streaming service that gives millions of subscribers access to its content online and through mobile devices. But in order to subscribe to HBO Go, customers first need to subscribe to a cable giant such as Comcast or DirecTV. In the digital age, when more than 21 million consumers pay just $7.99 to access streaming content through Netflix, that’s a huge headache–especially for those who’ve already cut the cord on cable, or aren’t interested in subscribing to HBO through an expensive cable package deal including tons of channels they don’t want to watch. Why doesn’t HBO launch an HBO Go-only subscription, similar to Netflix’s streaming-only plans?
That’s the question I posed to Alison Moore, HBO’s SVP of digital platforms, at Fast Company‘s Innovation Uncensored conference last week in San Francisco. Moore has been pushing HBO’s digital operations for years–so why not launch a digital-only service? According to Moore, “It breaks down to math.”
“We’re constantly evaluating what the right business model is for us,” she said. “If you think about it, there are 100 million TV-connected households in the US through [cable providers] like DirecTV or Verizon. Out of that, we have just over 30 million consumers who are HBO customers. So there are 70 million people who either had HBO at one point, or don’t have it right now, or are thinking about getting it. That’s a huge pond to fish in. You have about 5 to 6 million broadband-only households. That’s a smaller pond.”
For HBO, she continued, the company is taking a long-term approach, what she referred to as a five-year plan “in terms of where the business needs to evolve.” For consumers ever-demanding more access to more content more quickly, that’s a difficult strategy to swallow. After all, HBO produces some of the best content on television–shows like The Sopranos, True Blood, and Game of Thrones, which dominate the Emmy Awards. Even Reed Hastings, CEO of HBO-competitor Netflix, has admitted to loving HBO. He’s been trying for years to get the rights to stream the network’s original content–in fact, The Wire is one of Hastings’ favorite shows. The licensing checks just haven’t been big enough for HBO, he says.
But in order to provide top quality content, HBO needs a steady base of subscribers willing to pay top dollar. It’s estimated, for example, that each episode of Boardwalk Empire costs the company roughly $5 million. So when Moore talks of this decision being based on “math,” she might as well be saying the decision is based on “economics.” In order to have enough funding for its content, HBO relies on cable carrier fees–it’s not clear whether HBO could produce such great content by simply charging a flat $7.99 rate, like Netflix does. (Netflix, on the other hand, which charges less for subscriptions, has only started to enter the original content game through a $100 million license of the House of Cards series.)
Still, anecdotally, I’ve noticed a trend of consumers working around HBO’s long-term strategy. Many people I know tend to reach out to less-tech savvy family members who subscribe to HBO via television, get their cable provider log-in, and use that to access HBO Go on computers and mobile devices. The log-ins are often shared among friends–after all, who cares who has access to your mom’s @Comcast.net password?
But while many consumers see the cable providers as a roadblock, HBO sees them as an ally. “We get a massive amount of…benefit from being partnered with the cable, telco, and satellite affiliates,” Moore says. “They are our marketing partners–they take on a lot of our operational overhead in terms of getting HBO to the consumer. Part of what you might see is an evolution in that sphere–different ways and more unique ways [of delivering HBO to consumers]. These guys are getting smarter–because they have to get smarter–about packaging HBO. So where does HBO show up? Maybe it doesn’t need to be in the $100 buy-through package anymore. Maybe it needs to be more accessible to consumers at a lower package rate. That’s where you’ll see us go first in terms of more flexibility in getting to HBO.”
One thing is clear, however, she added.
“The key is making sure consumers get access to HBO in different points than they do today.”
[Image: Flickr user Goop on the lens]