HBO Decides It Still Isn't Difficult Enough To Watch HBO Shows

http://www.techdirt.com/articles/20120418/08405618545/hbo-decides-it-still-isnt-difficult-enough-to-watch-hbo-shows.shtml

by pavel_lishin • 14 years ago

250 176 14 years ago

techdirt.com

bryanh• 14 years ago

Archaic C-level execs are still making the calls. This isn't unexpected.

ssharp• 14 years ago

And armchair C-level execs criticize without understanding the reasoning behind the decision.

I don't like that I can't just buy a subscription to HBO Go (I recently dumped cable) or buy HBO shows on iTunes the day after they air, but there are lots of revenue-related reasons why HBO is restricting access to its content.

PureSin• 14 years ago

Oatmeal about difficult of watching Game of Thrones: http://theoatmeal.com/comics/game_of_thrones

and how I feel as a non US resident: http://theoatmeal.com/pl/game_of_thrones/nz

guccimane4• 14 years ago

Andy Ihnatko about Oatmeal about difficulty of watching Game of Thrones: http://ihnatko.com/2012/02/20/heavy-hangs-the-bandwidth-that...

gcb2• 14 years ago

He's never going to be a paying customer anyways.

before torrents he'd just show up at some friend with hbo. Today people don't mingle irl, so he downloads.

People on 4Chan age group are found of watching streaming with chat on the side. It's pretty much the same shinding concept of yesterday.

MichaelGG• 14 years ago

Basically that just comes back to not wanting to face reality. One can go complain about lame people are that can't wait 3 weeks for the official release on iTunes, complain how lame it is that someone demands the content on their terms, etc.

Reality is still that HBO is simply taking away the incentive to purchase the product. Right or wrong, that's the end result. So do they want to continue complaining, or actually try to make more sales? (And I'm sure HBO is aware of the tradeoffs, and feels like protecting their current model is more important than a few more digital sales. That might be a correct assessment, for now.)

rickmb• 14 years ago

Which is a typical way of reversing the argument. The whole point of copyright and the free market is to do exactly that: to have as the end result consumers that can get what they want at an affordable price whilst allowing the original creators to make a living.

Copyright violation is not "sin" like theft, respecting it depends entirely on actually making it work. If copyright is the only thing that actually stands in the way of that, it is being abused.

To paraphrase the author: The world doesn't OWE the copyright owners enforcement at any cost. If you can't distribute it under your 100% terms, you have the free-and-clear option of not publishing it at all.

viraptor• 14 years ago

The point he's missing is that we're in a global village. If your friends watch it, you'll know what happens because they will talk about it. Maybe you won't care, maybe you will enjoy it a little bit less with no suspense - depends on how social if your typical series watching.

I don't see anything wrong with the approach though. Noone's saying that people won't buy the series on netflix once it's finally available. Although we know how likely that is...

MartinCron11• 14 years ago

The only thing that Andy Ihnatko gets wrong in his critique is that he claims the original oatmeal comic is funny.

wpietri10• 14 years ago

The "I will argue publicly with an imaginary straw man" is one of the laziest writing devices in the world. Gosh, I wonder who's going to win?

jjcm• 14 years ago

I think Andy is missing the point of the Oatmeal comic. It's not that people want the content right then and there. That's a minor part in the larger picture: acquiring content illegally is a better experience than acquiring it legally. Let's say I purchased season one on bluray, and just as I was coming home from the store my friend gave me a thumb drive with the torrented files on it. I wouldn't even open the shrink wrap. If the bluray disc gets scratched, I no longer have access to my content; I can back up the files on the thumb drive though. If I want to watch an episode, I have to sit through commercials on the bluray that I purchased; I can watch them immediately off the thumb drive though. If I want to project using a vga cable, I may run into content protection issues; the files on the thumb drive will work just fine though.

It's not a matter of cost or wait time. It's that torrent networks provide a better, faster, easier, more portable, and simpler experience than the legal way.

redthrowaway• 14 years ago

Contents of the article aside, techdirt regularly writes fantastic headlines. I wonder if it's just the individual authors having a flair for the zinger, or if they have an editor who spruces them up before posting.

brandall102• 14 years ago

The thing that bothers me most about this is I credit HBO for leading the charge with innovative content that as a whole brought TV to a much higher level. They took big chances even when it wasn't profitable to do so.

I've had a serious love affair with the network beginning with Dream On, The Larry Sanders Show, then moving on to Oz (yeah it was a 'male' soap opera I guess :), Sopranos, 6 Feet Under, Deadwood - which I didn't particularly _love_, but highly respected, and most of all The Wire (best thing to ever grace the screen IMO - they lost $$ on it throughout its run)... and then I killed my cable sub and haven't seen anything of their's since.

Now Mad Men and Breaking Bad are my two favorite shows, they're both on AMC, and I can easily purchase each season on iTunes HD for just north of $30. Every episode is available hours after they originally air. I'd pay twice that much.

Of course, the problem is HBO is just too tightly coupled to big cable. They're one of the main attractions, and as such the kickbacks they get are tied to contracts that prevent them from wresting their content to any great degree. Until this model changes, their A content won't see the light of day, and more draconian measures are likely to be put in place to thwart piracy. It's not HBO itself per-see, but HBO as a proxy for big cable; as a defense mechanism to prop up a flailing business model.

jdludlow• 14 years ago

Our experiences are nearly mirror images. I cancelled cable TV years ago. When Game of Thrones came out last year, I naively thought "No big deal. I'll just pay HBO for streaming." I was shocked to discover that there's no way for me to upend my wallet into HBO's coffers without funneling it through Comcast and buying multiple tiers of garbage that I care nothing about.

I waited a year and bought the blu ray version, but I still can't understand why HBO wouldn't prefer to get their money earlier rather than later.

tswartz• 14 years ago

Completely agree with you. I was very excited when I heard about the HBO Go app and was looking forward to paying HBO for their excellent content. Similarly I was frustrated to find you need cable TV and Comcast to use it. Still trying to figure out a way to see the new season of Game of Thrones.

bsandbox2• 14 years ago

It's not that they wouldn't prefer to get their money earlier. It's that they are in bed with the cable companies, who have significant power because they provide a huge chunk of HBO's revenue. HBO don't want to risk losing that revenue by disturbing the cosy relationship.

Cable companies are fiercely protective of their status as content providers. As they see it, the biggest threat to cable is that it gets turned into a commoditized dumb pipe. Any move by partners like HBO in the direction of supplying content over IP is seen as a move towards marginalizing their business.

jonnathanson• 14 years ago

I couldn't agree more, as both a fan of HBO's content and a curious observer of its evolving business model.

For awhile there, it seemed as if HBO was making great strides in decoupling itself from the traditional cable model. HBO GO is a great app, and its launch represented an intriguing challenge to the status quo of the analog and digital content ecosystems.

We should keep in mind, however, that HBO is owned by Time Warner -- a company with plenty of vested interests in the status quo, not to mention a number of other cable and broadcast channels (CNN, Cartoon Network, CW, etc.) whose existence as discrete networks would be (in its view) threatened by overly disruptive maneuvers by one of its subsidiaries.

Furthermore, HBO's bread is buttered by the big cable providers. It makes the majority of its revenue from licensing fees to the likes of Comcast, Time Warner Cable (not presently owned by Time Warner, fwiw), AT&T, and the others.

Ultimately, I get the impression that HBO -- were it an independent business entity -- would be acting more aggressively to move away from the status quo. It seems to realize that it's aboard a slowly sinking ship. Unfortunately, it happens to be an officer of that ship's crew.

Gmo3• 14 years ago

The weird is that they project this model in Europe as well, whereas they are not as tight to broadcasters here.

The other day, there was an ad on TV for HBO Go. I was like "wow, finally, HBO in Europe (in the Netherlands in this case), AND with an app?!"

So I went directly to my computer to look at the details with the firm intention to subscribe if it'd be a reasonable price (let's say 15 euros per month).

So I go on their website and what do I see ? To get the app, you need to subscribe to their cable channels. But wait ? I just want the streaming, I don't care about their channels (particularly because I am in a shared apartment).

But I thought "OK, let's see how much they cost", so I go to the next page, and what do I see ? HBO is only available on Zyggo. No way to get them with any other provider. And I'm sure not gonna switch providers, a lot of hassle in the first place, but even more in this case since it's a shared apartment and all.

Conclusion : they lost one customer, and probably more, because I have plenty of friends here that watch a lot of HBO shows, usually illegally acquired, because otherwise you get to see them 1 year later, that would probably have paid for it as well.

Way to go HBO !

bmelton• 14 years ago

Between "Breaking Bad", "Mad Men", "The Killing", "Walking Dead" and "Hell on Wheels" -- if I could JUST buy AMC for cable, I probably would.

I used to love HBO, but they've been stagnant lately (in my opinion.) "Luck" is already cancelled. Though I had high hopes for it being the harbinger of HBO's return, I think the last great show they produced was "Carnivale".

Thanks for bringing up iTunes, as I've been having a hard time catching up on AMC shows I missed, and didn't know they had the inventory anywhere.

cgs• 14 years ago

I bought a season 1 of The Walking Dead on iTunes, and found it suboptimal. It kept automatically trying to download the normal version, HD version, and each "behind the scenes" episode for each episode. All I want is the HD version! This was annoying enough to me to go back to just pirating episodes for season 2. If this experience has changed I might reconsider.

dclowd9901• 14 years ago

Your 4th paragraph needs to be your first. The issue here is that HBO still (thinks they) needs big cable, and aren't willing to piss off cable distributors to offer a purely digital delivery. Why wouldn't they want to cut out the middle man financially? Current distribution systems like Hulu and Netflix already prove such a tactic is possible.

wpietri10• 14 years ago

HBO made about $4 billion in 2011 from subscriber revenue. The company is circa 40 years old. If you are an executive at a company that size and age, one of your primary jobs is to not fuck anything up.

Currently the upside to directly delivery is small; there just aren't that many people who have the hardware, bandwidth, and inclination to buy shows online. Certainly nothing like the 28 million subscribers they currently have.

There is no serious incentive for them to be a pioneer in this. Amazon, Apple, and Netflix are doing a fine job of figuring out what a la carte TV show delivery will eventually mean. When the market is big enough to make it worth getting in a fight with the cable monopolies, I'm sure HBO will do it. But for now, they can let other people take the risk.

ctdonath5• 14 years ago

Kodak didn't want to tick off their retail distributors to offer serious digital image processing. Look where it got them.

The problem for both is/was the jump from middleman-controlled to direct-to-customer involves a huge backlash in the process. The middleman will have to follow thru on the threat to drop distribution completely, at a time that direct customer contact is growing but still inadequate to make up that loss. Cutting out the middleman means a big hole that takes time to fill; it's killing the cash cow then waiting for the calf to mature.

kamjam2• 14 years ago

I think HBO have made some fantastic shows, Band of Brothers is one of my all time favourite series. I'm in the UK so not experience the restrictions that you guys in the states are facing. I'll tell you what is really annoying though is when they post a video on Facebook and then it's location restricted. This is not just HBO shows, still annoying as hell, particularly when it's just an interview of one of the shows actors or something. Seriously people, you have fans all over the world, these marketing channels need to reflect these global views!

desigooner• 14 years ago

The location restrictions are the same when I try to view something on BBC or Sky websites. They are just interviews or report snippets but it's restricted for viewing in the UK only.

ChuckMcM• 14 years ago

"They took big chances even when it wasn't profitable to do so."

Its an old story you will see repeated again and again. When you have nothing to lose, you take big chances, when you have lots to lose you mitigate risks.

"Of course, the problem is HBO is just too tightly coupled to big cable."

Given that 'big cable' represents a big chunk of their revenue I don't know if "too tightly coupled" represents it. Basically once the acquisition cost of digital content gets ahead of its marginal market value* the revenue stream becomes more and more at risk to alternate venues (like BitTorrent). My guess is that the 'blind spot' for a lot of companies that started before the prevalent Internet and are still around, aren't looking (or believing) the economics that show how they can thrive by sharing some of the ecosystem with the likes of NetFlix or Hulu or even YouTube. So it is left to a new 'HBO' which has nothing to lose to embrace the current mechanisms and markets and to be successful to lead the way.

* I define the term 'marginal market value' to be the net economic value derived from the difference between the lifetime value of a consumer purchase less the cost to acquire that consumer. Pre-existing structures like cable content agreements can create a revenue stream which is higher than the marginal market value for new customers, and when that happens, unless the company is thinking about it, they focus more on preserving those existing over valued relationships rather than building new consumer relationships to capture that value. Externally this expresses as a company whose margins and customers slowly erode over time until they either exit the market or things get back down to the marginal market value point and can start growing again.

samstave• 14 years ago

Don't forget Game of Thrones which is superb.

cletus• 14 years ago

This reminds me of an old Jeff Atwood blog post Commandos, Infantry and Police [1].

HBO was innovative in their "commando" phase but now they're a large cable incumbent. They're either in the infantry or police phase now. Basically they're not concerned with gaining new territory. They're most concerned with defending their current position.

This is a problem every incumbent faces when they grow sufficiently large. Microsoft's decisions of the last 15 years have been borne of a fear that something will kill the Windows/Office golden goose.

The ultimate evolution of this defensive strategy is for a company to launch a conflagration of litigation, often with a new CEO, in a last-ditch effort to squeeze out some value. You saw it with SCO. You see it with Yahoo.

Defense is a short-term strategy. At the point you stop innovating you've already begun to die. It may take awhile. Billion dollar companies don't die overnight (although Groupon may prove me wrong). Yahoo has been dying a slow death for years.

I would gladly pay a (reasonable) monthly fee just for HBO. But I'm not going to pay $100+/month for cable and it. I pay for Netflix. At $8/month it may not have all the content but it's enough for me.

HBO is now locked in the same death spiral big cable is: big cable doesn't want a la carte cable because people either won't use it if it's too expensive or they'll spend less on cable, neither being a good outcome (for them). HBO needs big cable to distribute their content. My theory is they can't circumvent that without threatening what is their main source of income (big cable won't react well to being cut out of the loop). The risk of that strategy, from their perspective, is simply too high.

HBO should be afraid of the rise of the likes of AMC. If they're not careful the next generation of innovators is going to eat them for breakfast.

[1] http://www.codinghorror.com/blog/2004/06/commandos-infantry-...

wpietri10• 14 years ago

I don't think they're at particular risk of a death spiral. Atwood and Cringely were talking about product companies. Content companies work differently.

As long as HBO continues to make compelling content, various distributors will line up to buy it. For now, the US cable companies are the bulk of their revenue. But they already make $1bn or so annually from overseas sales of their programs, so it's not like they're unprepared to sell a show to somebody like Netflix, Amazon, or Apple.

joeshaw• 14 years ago

To your last point, there was an article in the Economist last summer about HBO and the economics around it. Here's an excerpt as to why they don't decouple from cable TV:

"In future HBO Go could allow the network to bypass the entire pay-TV system. For now, going “over the top” in this way makes no sense, says Bill Nelson, HBO’s chief executive. There are roughly 105m multichannel TV households in America, of which 77m do not subscribe to HBO. By contrast, he reckons, there are only about 3m households with broadband connections and reasonable amounts of money but no multichannel TV."

From http://www.economist.com/node/21526314.

waterlesscloud• 14 years ago

But who for one second thinks that cable providers would drop HBO if they started going around them?

HBO has what cable companies need. The companies simply can't afford to cut them off.

HBO should call their bluff, honestly.

PostOnce• 14 years ago

I notice you mentioned Oz, The Sopranos, and The Wire, but not Rome. If you haven't seen Rome... I highly recommend it. http://en.wikipedia.org/wiki/Rome_(TV_series)

It was a big-budget affair, too.

sp332• 14 years ago

Here's something that I learned working for a cable company: HBO doesn't really know who their customers are! Or to put it another way: HBO's real customers are the cable companies. As far as I can tell, HBO never deals with subscriber data. That's why you can't sign up with them directly.

I know this because I know how HBO GO works at my company. The subscriber visits HBO's site, but then they have to tell HBO which cable company they have. Then HBO redirects them to that company's website! After they verify with the cable company that they are an HBO subscriber, the cable company redirects the user back to HBO with a "subscriber" token.

guccimane4• 14 years ago

"We've recently discussed the fact that HBO severely limits the availability of its shows to non-subscribers..."

Really?! How dare they!

sophacles4• 14 years ago

Cut the disingenuous crap. The next 3 sentences state that beyond that, they are now, without warning, requiring paying subscribers to upgrade equipment to handle the HDMI encryption. The first sentence was merely contextualization. Further, the context of that sentence (via the link) was how difficult it is to legally pay HBO for the thing they are supposedly selling.

guccimane4• 14 years ago

I know. I don't make any bones about this HDCP stuff being bullshit. They are screwing their own, paying customers. That's terrible.

It's just that I really have no time for this entitled attitude that content owners are obligated to sell their wares to us when we want, how we want, at the price point we want.

excuse-me2• 14 years ago

>Really?! How dare they!

How dare the executives lose shareholder's money by refusing to allow new customers to pay for the content and so make profit.

Preferring instead to stick to cozy little cartels where they sell content only to the same cable stations that they used to work for, and will go back to when their bonuses clear.

Remember it's not 'their' company - the company belongs to my pension fund - 'they' are supposed to be working for me.

guccimane4• 14 years ago

Interesting angle, I've never seen someone come at it from the POV of the shareholder. If you're unhappy as a shareholder with HBO's strategy, I can understand that. Do whatever shareholders do in that scenario, I guess. (Vote? Sell?)

From the consumer side though, HBO has no obligation to do what a bunch of people on the internet who think they understand HBO's business better than HBO does think they should do.

loudmax• 14 years ago

The frustration isn't that HBO is demanding money for content. Many of us would happily pay for episodes of GoT as they're released, or even signing up for HBO online and paying a monthly fee.

What I won't consider is a cable subscription, and lots of us feel that way. I don't want all those other channels. I just want HBO. Or better yet, just certain shows. I have money, they have content. Let's trade, yes? If not, torrenting episodes as they're aired is an attractive proposition while we're waiting for the season 2 DVDs to go on sale.

MartinCron11• 14 years ago

torrenting episodes as they're aired is an attractive proposition while we're waiting

Because you can't, you know, just wait until they are legitimately available?

tomjen34• 14 years ago

Actually they make it difficult to watch it _legally_. Lets not pretend that most people don't get it from a much more convenient source:

(example pulled from google):

http://thepiratebay.se/torrent/7153447/Game_of_Thrones_-_Sea...

guard-of-terra10• 14 years ago

It's fascinating to watch how much opportunity they are throwing out of the door.

According to blog monitoring service blogs.yandex.ru, Game of Thrones is third most discussed TV series in Russian speaking countries right now. Obviously a huge number of people watch it from various of sources: original torrents, translated torrents, streaming... But HBO gets exactly zero from this. They just don't want anybody's money. They do nothing.

wpietri10• 14 years ago

I'm sure they want it. But as any Game of Thrones watcher knows, the alliances that you make in the pursuit of power and wealth mean you can't always do what you want. Yet.

kamjam2• 14 years ago

The funny thing is because they just made it more difficult for people who are paying good money to subscribe to their service, they may well have driven a whole bunch of people to cancel their subscription and go down the illegal route because it is so much easier, and cheaper than buying a new cable box! Crazy!

Karunamon• 14 years ago

Err.. I agree with you on principal, but "most people"? I'd wager that not even a majority of people who watch HBO content do so by resorting to copyright infringement.

If they don't pull their heads out though, that number will continue to increase. It's not as if piracy involves a great deal of mental capacity or even difficulty.

rprasad2• 14 years ago

How to legally watch Game of Thrones: 1) Turn on the TV. 2) Change channel to HBO. 3) DONE.

That is infinitely easier for most of the population than downloading a torrent; it takes at most 4 button presses. If your TV is too old to handle the new content protection scheme, buy a new TV. If you can afford HBO, you can afford a new TV.

The type of people who would prefer to download the show via torrent are generally the type of people who wouldn't pay for HBO to begin with, so HBO doesn't care about the mythical money to be made off them.

tomjen34• 14 years ago

Looking at how many people buy music on iTunes because it is convenient and assuming they would buy the video if it was also available, means that you are very, very incorrect.

And the nonsence about if you can afford x, you can afford y. No, that is not a given. I can afford one luxury and just because your priority would be given to luxury A does not mean that I give A the same priority.

Anyway it is a moot point. HBO is not available outside the states.

masklinn• 14 years ago

> How to legally watch Game of Thrones: 1) Turn on the TV. 2) Change channel to HBO. 3) DONE.

Yeah, except for 2 not being an option for about 95% of the planet.

oops.

Thankfully torrents are an equal-opportunity distribution channel I guess.

Bud• 14 years ago

This is total BS, at least in my case.

1. I refuse to pay for premium Comcast at 2x the price of my very nice Internet connection just to get one channel. 2. I am very happy to pay $8/mo to Netflix. 3. I'm also very happy to buy LOTS of physical media; I own over 600 titles on DVD or Blu-Ray, and counting. Many of these titles, I have bought two, three, or even four times in different contexts (DVD, Blu-Ray, iTunes, etc.) 4. I'm also happy to pay for all of HBO, even though I don't really want to watch all of HBO.

I just don't want to give money to my local cable monopoly, a lot of money, when I only want about 3% of the content they insist on bundling together.

I really don't think I'm the bad guy here.

reustle2• 14 years ago

HBO Go on the iPad doesn't let you stream to your TV via the VGA cable, so they forced me to do this this weekend: http://i.imgur.com/Og3MH.jpg

moreati• 14 years ago

What did you do? I can't tell from that photo

mnutt• 14 years ago

It looks like two iPads, one playing the movie with the other one above it in video record mode, presumably streaming to the TV.

greggman• 14 years ago

THIS is exactly why PG made his call to kill old media. HBO could be making bank by allowing either PPV online, subscription online or commercial supported. They have some of the best shows ever. But for whatever reason, out dated contracts or old thinking they are throwing money away.

citizenparker• 14 years ago

HBO is making bank. Until we as consumers vote with our wallets and change our behavior by canceling subscriptions, nothing will change for HBO or their bottom line.

davidpetersen• 14 years ago

hbogo.com is still the best website I know of for watching any tv channels shows. HBO subscribers get access to every single show the second it comes out, and it remains available forever. I can go back now and watch every episode of every HBO show.

So while I empathize with all of your complaints that HBO makes it too hard for non cable/DirecTV subscribers to subscribe, I think they are due credit for putting all of their content online when most other channels have not.

acuozzo• 14 years ago

> I can go back now and watch every episode of every HBO show.

Really?! Can you watch ``Tales from the Crypt'' or ``The Kids in the Hall''?

Can you really watch _every_ episode of _every_ HBO show in the following list?

http://en.wikipedia.org/wiki/List_of_programs_broadcast_by_H...

res0nat0r• 14 years ago

HBO aren't idiots. They've done the math and for now they've found it IS more profitable for them to only allow you to get their content with a cable subscription. Why does when it come to big media everyone thinks the companies are run by 12 year old morons when they don't agree with their policies?

Hurting Game of Thrones Through Piracy Won’t Change HBO’s Business, It Will Just Get the Show Cancelled: http://www.filmschoolrejects.com/features/hurting-game-of-th...

scott_s• 14 years ago

They've done the math and for now they've found it IS more profitable for them to only allow you to get their content with a cable subscription.

I doubt that. Rather, I bet they've made a conscious choice to only be a content provider, not a content distributor. That's a fundamental business change. I say this because if HBO decided to make the change, and enabled, say, a $10 online, streaming subscription, I think they'd make more money than they do now. But that would likely upset their current deals with the cable companies, and it would be a fundamental business model change.

jfb• 14 years ago

I say this because if HBO decided to make the change, and enabled, say, a $10 online, streaming subscription, I think they'd make more money than they do now.

They don't think so. And they have the internal numbers to back up their decision. HBO is a very smart and well run company, and they make buckets and buckets of money from their deals with the cable companies.

You (and I) would love to be able to buy access to their content without paying Comcast (or DirecTV &c.) but the number of people holding that position is VASTLY OUTNUMBERED by the number of people willing and able to pay $40/mo or whatever on top of what is considered a utility service. That's not going to change fast, and there's no point for HBO to get those arrows in their back when Apple/Amazon/Netflix are charging ahead regardless.

bsandbox2• 14 years ago

Certainly possible that they would make more money, but I doubt it. Doing some (very) rough math, HBO has about 28M subscribers. Cable customers pay $18 bucks a month for HBO, of which HBO usually gets 50%. So an overnight change in the business model would require 28M subscribers at about $9 / month.

Just as a point of comparison, Netflix, with a much larger catalog of shows and movies, has something of the order of 25M subscribers

Obviously an overnight change would not happen, there would be a transition over several years and the streaming subscribers may well be supplementary to existing subscribers. But during the transition, cable company partnerships would be strained and existing revenue would be at risk. Not to mention the capital investment required to provide the content reliably, dealing with the multitude of streaming devices, providing customer support, marketing the product directly to consumers and all the other things that cable companies take care of (albeit badly). Netflix is making bold changes in its business model and it's certainly not an easy thing to do.

Ultimately, HBO's core competency is in creating amazing content. It's arguable if they'd make more money by changing their business model, but I'd wager that HBO execs simply do not want to have to deal with all the distractions from their core mission that would occur by doing so.

rprasad2• 14 years ago

* I think they'd make more money than they do now. But that would likely upset their current deals with the cable companies, and it would be a fundamental business model change.*

They've done the math, and they wouldn't make more money than they do now. That's why they haven't done it yet. It's not just pure subscription numbers that matter -- it's the millions in free promotion that cable/satellite companies provide that must also be factored into the cost equation, as well as the millions in costs they would incur by expanding their streaming options.

SnowLprd3• 14 years ago

Maybe the folks at HBO are brilliant; maybe they aren't. That's besides the point.

The point is that companies like HBO are probably leaving money on the table. There are a lot of folks who are willing to pay to watch Game of Thrones, assuming that they could pay a couple bucks to download (not stream) a high-quality 720p/1080p file around the same time the show airs on HBO. But HBO has (apparently) decided that's not in their best interest, instead only providing two options:

1. pay for an HBO subscription

2. wait for disc-based release (DVD/Blu-ray)

For folks who have cut the cable/satellite cord and who don't want to wait for months, neither option works, so they pursue the only option left.

Maybe the folks at HBO aren't idiots, but then again they haven't exactly experimented with a different model, now have they? They assume they make more money with the current legacy model, but as Louis C.K. discovered, I'd wager HBO would actually make more money if they allowed folks to buy downloadable high-quality .mp4 files at the same time the show airs. If they ever decide to try that model, then -- and only then -- can you or HBO claim they've done the math.

fryguy• 14 years ago

It's not necessarily true that HBO is leaving money on the table. It could be that having a streaming service is against some contract term they have with the cable companies, and having one would lose them $x per customer. That amount could be less than what they've determined they could make from streaming. In that case, while they aren't taking your money, they are still maximizing their income by doing so. It's the demand curve in play. If 200 people are willing to pay $50 for something, and 50 more people are only willing to pay $25, then it makes sense to sell it for $50, since that makes $10000, rather than $25 since that makes $6250. In the second case, more people enjoy it (all 250), but the company makes less money. I'd highly suspect this is wrong though, given what Valve has demonstrated with price levels and video games.

bascule2• 14 years ago

How do you do the math when one of the unaccounted variables is the potential conversion rate of people who would pay for a HBO streaming service but won't pay for it if it's chained to a pay TV subscription, and so they pirate instead?

Piracy thwarts everything HBO has to track and measure ratings, so how could they possibly "do the math" and figure out the size, demographics, and potential conversion rate of this group?

I think it's more chaining HBO to a cable subscription is a known quantity, and venturing out into a pure streaming service is the great unknown.

mikeryan2• 14 years ago

so how could they possibly "do the math" and figure out the size, demographics, and potential conversion rate of this group?

Honestly its not that hard. HBO just has to look at how offering HBO GO as a standalone service would cost them from whatever punishment would be handed down from the large cable operators. This is likely a very known quantity (We'll call it X). Then they just need to do a little market research to know how many people are 1. not buying cable. 2. Would by HBO Go as a standalone service (We'll call this Y) if Y is greater then X then it would make sense. The Piracy conversion angle is pretty meaningless since its a subset of the actual target market.

I have no idea the actual numbers but having worked in the industry for sometime I'm guessing that Y is pretty much a rounding error compared to X.

billpatrianakos• 14 years ago

I'm glad you had the balls to say this. It really stumps me when I see everyone basically saying they know better than HBO how to make money. I don't doubt the logic and stats behind everyone's reasoning but I do doubt that they know something HBO doesn't.

HBO I'm sure has more people working on how to make the company profitable than there are comments in this discussion. There's some entitlement floating around here masked as "better ideas". I have no doubt that HBO wants to make paying for their content as easy as possible but...

* they might have done the math and found this way to be more profitable, losses to piracy be damned

* it takes a lot of different entities to make a show like Game of Thromes and you better believe that there are pre-existing contracts galore. These pre-existing agreements may be what's keeping the situation as it is now

If scenario 1 is correct then that's just tough for us. We'll have to wait or pirate. If we pirate then HBO probably doesn't care anyway or they wouldn't have made watching GoT so damn hard.

If scenario 2 is correct then we're placing blame and frustration in the wrong place. At the same time this scenario can vindicate popular opinion around here too.

Whatever the case may be, I sincerely doubt HBO doesn't know what they're doing. They absolutely cannot be so incompetent as to not understand that making it impossible to pay for the show will drive people to piracy. As for inconveniencing current customers, I want to give them the benefit of the doubt. Maybe they had a deal with Dish and Cable companies and expected all boxes to be replaced by the time they made this change in their broadcasting.

I could be wrong but if HBO truly doesn't get it my head might just explode.

davesims• 14 years ago

Or it could be a lot of both. HBO certainly must see the writing on the wall for cable, but it would seem they're not being as aggressive as, say, Netflix in deploying on-demand content. But they are positioning themselves. Why else provide online content only as a value-added proposition to full-price cable subscribers?

HBO is obviously making moves towards this transition, but the numbers probably just aren't there yet to justify taking the full plunge. It looks to me like they're hedging their bets. Netflix's biggest challenge is content, right? When the time comes, I don't think that's going to be a problem for HBO.

Or, maybe their C-levels are just bailing water on the old model. But I kinda doubt it.

ctdonath5• 14 years ago

It really stumps me when I see everyone basically saying they know better than HBO how to make money.

Kodak knew how to make money. Everyone thought they knew better - and they were right.

zerostar073• 14 years ago

True. And if one can build a better platform for them to monetize their content, they should just do it.

Androsynth2• 14 years ago

I don't think they are idiots, I am just upset that they won't take my money.

I would be happy to pay them for a subscription. It's just basic cable that I won't pay for.

dasil003• 14 years ago

Wait a minute. Did you or any of the responses to you actually read the article? No where does it mention one word about where they are making their content available.

The point of the article is that they are employing new DRM that is locking out paying cable subscribers. Furthermore this does not affect pirates because all it takes is one guy to crack the DRM and seed the torrent and it's game over. The effect of this is to promote piracy not to suppress it, and I challenge anyone to provide any credible evidence otherwise.

tlogan2• 14 years ago

Of course HBO management are not idiots. They are actually doing the best to increase profit of the company (in short term).

However, I think the theme here is that cable subscription model is getting disrupted: more and more people will not have cable and will relay on other ways to get viewing content. It might be too late for them to transition to brave new world if they don't start now.

wpietri10• 14 years ago

How do you imagine HBO getting screwed in the long run? As far as I can see, there will be distributors in any brave new world. Amazon, Apple, Netflix, and Hulu are going that way. As long as HBO keeps making quality content, distributors will be lining up to bid on it.

jsz0• 14 years ago

Cable/satellite is basically the sales & promotion department of HBO. Providers give away months of free HBO at their own expense. They have sales & customer service reps up selling HBO aggressively. Providers do direct mailings, billboards, etc to promote HBO. Why would they give this up? They're going to use the same strategy to push HBO GO via cable/telco video providers.

When HBO finally does make the shift to a standalone IP service it's going to look a lot more like Netflix than the iTunes Store. HBO doesn't want to sell you a couple episodes or even an entire series. They want to sell you the entire HBO service every single month. They will continue to stagger their original programing so you are enticed to keep the service instead of canceling after your favorite show is done for the season. They will mix in older catalog titles with newer titles to keep programming costs under control. They will continue using the HBO service's popularity as a platform for launching new original programming.

The fact that no one else has been able to pull off the HBO model via IP yet is a pretty good indication that HBO has time to gracefully make the shift to IP on their own terms. Netflix is trying but they don't have the original programming yet and that's a huge part of HBO's success.

hjkl• 14 years ago

"...HDCP encryption, a newer part of the HDMI standard..."

I don't think that's true.

My understanding is that HDCP encryption has been around for as long as HDMI has been around. For example, Blu-ray discs/players use HDCP to encrypt their content.

It seems strange that these DVR boxes don't support HDCP. Maybe some of the heat should be directed towards DirecTV for using such non-compliant hardware.

alexbell• 14 years ago

I hope Netflix's original content gets good/becomes a large enough library to threaten HBO. They would offer subscriptions over apps, set top boxes, and maybe even browsers shortly after.

Content providers need to be smacked around by someone like Netflix in a big way.

amosson• 14 years ago

This move fits with HBO's (and really every content provider's) anti-piracy strategy. Namely, content needs to be encrypted from the time it leaves their server's to the time it is decoded by the screen. The reason for this is simple, if they achieve this goal, they can argue that anyone who provides an unencrypted copy of content must have violated the DMCA (which has provision against tampering with encryption). Whether the technologies have cracked (the article points out the HDCP has been) or whether the provider ever prosecutes isn't the point, the content providers feel they need to reserve their rights at any cost.

Many folks (techdirt included) argue that piracy is just marketing. For instance, it allows HBO to reach an audience they wouldn't reach otherwise. They even speculate that the Game of Thrones ratings bump was due to piracy. While that may (or may not) be true, in most industries, companies control when, where and much to spend on marketing.

For HBO (or any content provider) all these decisions come down to economics and how they can maximize their profits. In this new case (adding HDCP to their streams) they probably judged that the number of customer's they'd loose was pretty small and making the change would allow them to further their strategic goals.

voyou2• 14 years ago

"if they achieve this goal, they can argue that anyone who provides an unencrypted copy of content must have violated the DMCA (which has provision against tampering with encryption)"

How does that help them, though? Anyone who provides an unencrypted copy has infringed on their copyright, so HBO can go after them on those ground whether or not they also violated the anti-circumvention provisions of the DMCA. It seems to me this would only be useful if they think they can actually prevent people from circumventing their DRM.

njs12345• 14 years ago

I wonder how much revenue you'd raise on Kickstarter if HBO agreed to release The Wire into the public domain for a certain sum. Enough to make it worth their while? I think so (especially if they released the source material so people could get it in HD, not currently available)..

rmc2• 14 years ago

probably very little to release it as public domain, since people could then sell and keep all the profits themselves. It would kill their chance to sell it themselves.

A Creative Commons licence (CC-NC-BY-ND (non-commerical, attribution required, no derivatives)) might be better.

tptacek4• 14 years ago

I just pay for HBO. It's one of the few channels on TV I actually appreciate having. That's HBO's business model: they want subscribers. They don't care how difficult it is for you as a non-subscriber.

As a subscriber, HBO has made it incredibly easy for me to watch HBO shows: I have access to virtually all of them online on demand.

Tycho• 14 years ago

I have access to virtually all of them online on demand.

Can most people subscribe to HBO? Or do you need to buy it along with lots of other stuff? If all people need to do is pay the subscription then I struggle to see what all the fuss is about.

tptacek4• 14 years ago

I believe you may need basic cable.

In fairness to this thread that I just barged into and started shouting on (per usual): I have to concede that if you're one of the people that doesn't want to own a TV, it is annoying that HBO won't just let you pay for a subscription directly (that I know of). They could just sell access to HBO GO.

On the other hand, give them some time. HBO GO is very new.

zerostar073• 14 years ago

Their shows are popular outside the US. They don't seem to want any subscribers from there.

_fn• 14 years ago

I have HBO on my cable tv subscription, I think they have GoT on it. Of course it's a few weeks late.

brandall102• 14 years ago

I'd gladly pay for HBO. The rest of the cable sub? Not so much.

HD Cable + HBO sub = $70/mo, $840 per year.

6 quality HD shows per year @ $35 each season on iTunes = $210.

Of course everyone is different, but I'm only watching 1-2 shows at a time every season, and for people like me, "just paying for HBO" would cost me 4x as much as I should be paying for the amount of content I'm consuming.

EDIT: Whoever down-voted me, could you at least explain why? As a consumer, I don't feel like subsidizing a bunch of content I won't even use. Yeah, I get that's their model, and as such I don't see their content. It's a pretty fair non-transaction.

hooande• 14 years ago

Let's not forget what they say about how HBO works financially... softcore pornography and boxing pay for all of the "Game of Thrones"-level masterpieces. While they have produced unfailingly inspirational television, it's not a core part of their economic engine.

It's a shame that non-subscribers can't see all the programming, but we wouldn't have it at all if it wasn't for their business model. As good as HBO's programming is, it probably wouldn't be economically feasible if it had to be directly supported. There might be enough income from itunes to (barely) support breakout hits like GoT, but it's unlikely that all of the shows that led up to it would have earned enough money to stay on the air.

Cable companies may be evil, but HBO definitely needed them in order to start. They can't be expected to unwind the relationship on the promise of netflix streaming sales to come.

(Disclaimer: I love HBO and will watch anything they make)

ralfd• 14 years ago

> softcore pornography and boxing pay for all of the "Game of Thrones"

Well, softcore pornography and violence is not that much different to Game of Thrones. ^^

zerostar073• 14 years ago

Suppose someone created a landing page where guilt-ridden torrent downloaders can spend a reasonable amount (say $2 per episode) to get rid of their guilt, would HBO accept the money?

elemeno2• 14 years ago

Is't that option just called buying the shows from iTunes or on DVD?

tomflack• 14 years ago

What about where it simply isn't available? The question isn't about the different ways to give HBO money, it's about if they'd accept that money.

rmc2• 14 years ago

No, because torrents are available to more people than iTunes or DVDs. Try living outside the USA and/or using Linux.

beloch• 14 years ago

Cable provides a lot of entertainment, but it's expensive, especially if you pile on premium channels like HBO. Just as telephone landlines are slowly dying as people decide a cell-phone is enough, cable is dying as people move to strictly on-demand services like Netflix or iTunes. Why pay for 900 channels with nothing to watch when you can get just the shows you want anytime you want them? Even if people spend more on iTunes and netflix per month, the practice still psychologically seems less wasteful.

HBO's latest shows are not available anywhere but over the air on HBO. e.g. Game of Thrones Season 2 cannot be watched on Netflix or purchased on iTunes. Those who run HBO probably think of this as being good, since it forces people to subscribe to HBO. Unfortunately, people who have gotten rid of their cable subscription aren't going to get it back just so they can watch HBO's latest shows as they air. They might intend to wait until those shows become available on iTunes or Bluray, but it's also highly probable that they'll give in to temptation and just download them from pirates.

This is HBO's real problem. There is a big market for their shows that only the pirates are serving.

chris_wot• 14 years ago

There are two perspectives on HBO and piracy. The first is that they are losing money due to piracy.

The second is that they aren't losing money, just not gaining it.

I suspect they are betting on the second perspective. Foolish, but seems to be there business plan.

JVIDEL• 14 years ago

HBO was born with Cable, it was disruptive back then because TV in those days was boring, dull, repetitive and way too family-friendly.

They don't "understand" the internet, just like TV channels of old didn't understand that not everybody was into Dukes of Hazzard and The Andy Griffith Show re-runs.

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