Online Outlook: It's Not TV, It's HBO OTT

By Bob Wallace October 23, 2014

HBO’s decision to launch an online service sometime next year has been rocking the technology, media and entertainment industry - despite almost a complete lack of detail on the anticipated undertaking - raising core questions for consumers, and the premium channel’s current pay-TV distributor partners.

"So, in 2015, we will launch a stand-alone, over-the-top, HBO service in the United States," said HBO CEO Richard Plepler said. "We will work with our current partners. And, we will explore models with new partners. All in all, there are 80 million homes that do not have HBO, and we will use all means at our disposal to go after them."

As vague as that statement is, it hints at efforts beyond the standalone web service, to go after the 80 million homes that the CEO says don’t have HBO. And while going direct will attract many, it will almost certainly lose many from the ranks of its pay-TV partners, who have counted on premium channels like HBO to fuel their TV Everywhere customer retention efforts.

Words of Wisdom?

A German World War 2 general was quoted as saying, “You have to measure what you stand to gain by what you stand to lose.”

Pay-TV providers stand to lose quite a bit, even if their customers with HBO still remain their customers. That’s because cost-conscious consumers will likely dial down to more entry level basic cable packages minus premium channels like HBO, and buy it on the side as many do today with Netflix. You don’t have to cut the cord to do significant damage to a pay-TV provider.

The highly anticipated HBO move could, more importantly, score well by appealing to demographics, teens, college students and those leaving the nest that want entertainment, but haven’t yet had to pay for it. I don’t see this multiple age group signing up for pricing cable packages after growing up with so many web options for entertainment.

Competition Building

Remember, the list of those vying or already out there competing for pay-TV service package revenue, grows by the month, regardless of the specifics of how they are offered.  CBS joined last week along with DISH Networks, Sony and anticipated entrants from Verizon and AT&T in the months ahead.

And this all comes against a backdrop of two major acquisitions in progress that could also help reshape the pay-TV service landscape: AT&T-DirecTV and Comcast with Time Warner Cable.

With all this uncertainty, a few things are certain. One is that HBO is and has been a high quality product over the decades despite changes in content preferences and heavy competition that is still highly in demand. Check out its HBO Go app if you think otherwise.

What is HBO Today?

But before you can decide if the promised HBO service is for you (no pricing, packaging or real detail has been released), you must first define what HBO is.

Is it the original Home Box Office from 1972 that airs movies but little else? Is it a channel with a long and storied history of killer original series? Or is it a channel that’s too low in sports programming? For many there’s likely another option; a rich mix of content beyond today’ not-so-stellar Hollywood theatrical pipeline that includes family and ethnic programming.

Original Series? For those fans of great original series – dating back to The Sopranos – a standalone HBO service is gold. Even Netflix users who get House of Cards and Orange is the New Black, are aware of Game of Thrones, True Blood and Boardwalk Empire, but don’t seem to care much about HBO’s movies as they already have their own. More is better, of course, but not a top selling point for the onetime “movie channel” (Home Box Office).

Movies? For those movie fans, countless competitors and options have diminished HBO’s movie lineup over the decades. There are other premium channels such as Showtime, Starz, Cinemax, The Movie Channel (nice name) etc. and upstarts that show plenty of movies.

One new movie a week, with the diluted lineup of films coming out of Hollywood these days, isn’t enough of a selling point nowadays when the currency is first and foremost original series. Movies can be additive and they can be an eye roller as well.

Image via Shutterstock.

Covering the Waterfront? The fact that HBO has evolved into a series of channels which include family programming, comedy and ethnic content is the company’s next most compelling lure (after original series). Others have followed suit but not to the same extent, yet.

Sports Fans? If you’re primarily a sports fan, you’ve come to rely on numerous other sources instead of HBO for compelling content. HBO led with live boxing back when live boxing was relevant. It still offers it and some behind the scene specials, (and Real Sports with Bryant Gumbel) but very little else.

Relatively speaking, that’s quite a bit more than can be found on competing “movie channels.” Sports fans won’t flock to an HBO only service as its content stands today. Only live sports content (games) is king.

Netflix Users? That begs the question of whether Netflix subscribers could/would leave the service for a standalone HBO offering. Depending on how the new service is priced and packaged, Netflix users could jump ship, or they could add HBO online. As with most things TV/entertainment, it’s a matter of cost.

It’s safe to believe that a sizable chunk of households without HBO have Netflix, another OTT service, both and/or over-the-air broadcast TV.

And while these are eligible targets customers per HBO’s CEO, the company will need to be more creative than pay-TV providers’ practice of offering free trials and limited time promos to hook viewers on adding and paying for the channel.

Who’s Afraid of HBO Online?

Beyond competitors, there are two answers – pay-TV providers and pay-TV providers.

They have by far the most to lose if the HBO service weakens their TV Everywhere efforts. And they have much to lose if subscribers dial down to the lower and cheaper basic cable packages and sign up for HBO’s service to fill the entertainment gap.

But until we get more details from HBO, it’s anyone’s educated guess on what impact such a web-only service will have on its current partners and consumers.

So, as always, stay tuned!

Edited by Stefania Viscusi

Founder, Fast Forward Thinking LLC

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