Why HBO's president panned Internet streaming (and Forbes' linkbait)

by dko • 14 years ago

67 27 14 years ago

dcurtis• 14 years ago

I just want to add that the other HN story title was completely incorrect linkbait as well: "HBO CEO: '...an internet-based model [for TV] is just a fad'".

It wasn't HBO's CEO, and he didn't use the word "fad." That word was from the Forbes writer. Also, it wasn't a direct quote.

rflrob• 14 years ago

> What you don't want to do is to pursue a distribution channel over here [ed: the internet], where you think, well, let's go around the affiliate and we'll get a couple hundred thousand subs. But the promotional, and packaging support we get over here [ed: the affiliate networks], which, by the way, is the foundation of our 30 million subs

I'll believe they've done the market research to believe that "couple hundred thousand" number, but I have a harder time seeing that offering their own, independently subscribable[1] distribution channel will affect their core business model much more than piracy already is. From my perspective, they're just leaving money on the table for no clear gain.

[1]bear in mind that it's only whether or not you can subscribe to HBOgo independently of owning a tv and basic cable subscription that should be the issue, since they clearly believe offering streaming is good for both them and their customers.

dasil0032• 14 years ago

Did you not read about the benefits the affiliate is bringing? HBO is good enough to sell cable subscriptions. There's a symbiotic relationship there.

Assuming that they profit per subscriber is the same either way, what you're trying to argue is that there is not a single person who would cut their cable in favor of an official HBO streaming service who hasn't already done so in favor of piracy. Well either that or you think they'll reclaim a lot of revenue from pirates, but that still screws the affiliate which has a significant downside that you're not accounting for.

ecaradec• 14 years ago

Their strategy is smart and reasonable if people perceived HBO as delivering great shows that are worth paying extra useless channels to get, which I don't think it is (but I'm french and not very exposed to their marketing ).

I fear that HBO is living in the Bubble of their Brand like so many companies, thinking they are the best thing ever and that customers should be grateful whatever way they accept to provide stuff. There is a trend toward simpler deals now where you pay for what you want, not for 3, 4 goodies you never asked.

jan_g2• 14 years ago

I think that HBO is the best part of my TV subscription. They offer unlimited viewing of their content for flat rate (10EUR/month). Included is also web streaming (HBO GO), so that I can (and do) watch the movies on various computers in the house.

Compare this to various 'online movie rentals', where I'd have to pay 2EUR/movie.

chc• 14 years ago

Yeah, it costs that little if you're already paying through the nose for a cable plan. If you're not, you have to pay for a cable plan just to get HBO GO, so it works out to something like $120 a month. You'd have to watch a lot of movies to approach the actual cost of HBO.

dasil0032• 14 years ago

HBO is the best thing ever in TV. Over the past 15 years they have raised the bar of television, and the corpus of television programming they have produced is qualitatively unequaled by anyone.

How the affiliates choose to market and distribute HBO is not really their concern. As long as they are delivering them tens of millions of subscribers and HBO doesn't have to lift a finger for sales, marketing or distribution then it's going to be very hard for the Internet to equal that. It may well be that cable will be disrupted, and consumers will be unwilling to pay the type of premium that HBO requires, and that quality of television programming will go the way of the dodo, but there's no reason to believe that HBO would benefit from hastening that demise.

chaostheory• 14 years ago

HBO's CEO is rational. When I read the excerpts though, it reminded of the time before ink jet printers were dominant. I believe Epson on top, and they were giving a lot of valid reasons for sticking with dot matrix production without a good plan to transition into ink jet printers. Well fast forward some years later, and you have HP eating their lunch.

sirclueless• 14 years ago

> It's not really HBO's fault that Game of Thrones is pirated so much. It's the fault of the entire ecosystem.

It's the fault of the entire ecosystem that a company is targeted by pirates when it chooses to make a small number of high-quality TV shows with excellent production value and put them behind an expensive paywall only available to people with cable TV subscriptions?

I mean, I understand the rationale of HBO in accepting the cost of piracy in order to maintain a lucrative symbiosis with cable affiliates. But I'm sure they recognize that in doing so they cause a significant amount of piracy, and it harms everyone in the TV business, not just HBO.

There's basically two driving forces behind piracy. One is price, but there is a good argument to be made that people who pirate because they couldn't otherwise afford to pay otherwise don't actually affect the bottom line very much. The other is universality. Ten dollars a month to a usenet provider or VPN service will give access to every single major movie, TV show, and album within a few days of release. It comes in multiple DRM-free formats, and can be played basically anywhere.

So long as piracy has a distinct service and price advantage over HBO, they are encouraging piracy. And the worst part for TV producers is that there is a negative network effect: once someone spends the opportunity cost to pirate Game of Thrones, the marginal cost of pirating something else goes way down, and services that do compete favorably with piracy from a service perspective like Netflix and iTunes suffer as well.

cubicle67• 14 years ago

It's not really HBO's fault that Game of Thrones is pirated so much

interestingly, Game of Thrones, Season Two, is available on iTunes here in Australia and follows only 10 days after US release. We pay rather more here than in the US, but at $28 for a season pass, it's cheaper than the cost of the DVDs when they come out

kldavis42• 14 years ago

Interestingly, Game of Thrones season 2 is not available on iTunes in US. What's up with that? I wonder if it is relating to cannibalizing the US cable subscriber base as discussed in the article. I would definitely pay for it via itunes if it were available, even with 1-2 week delay.

FuzzyDunlop• 14 years ago

One major advantage piracy has over the current distribution model for most entertainment is its embracing of globalisation. It doesn't matter where you are, you can still consume the content.

Compare this to films and TV, where any non-US viewer has to wait possibly months before they get to see it legitimately. Considering these shows are discussed openly on the net, you have no feasible way of engaging in the discussion that surrounds these shows when the new episode airs in the US.

In some cases, the shows won't even see a DVD or Blu-Ray release outside of the US (see: Breaking Bad after season 2).

Maybe I'm naïve, and there's really not much profit in truly borderless global distribution. But assuming there is, the sheer determination of Big Content to enforce those borders and boundaries is really blinding them to simple opportunities to capitalise.

In fact, I think HBO are in the UK, now you can see some of their shows on Sky Atlantic. But generally, we have to wait a while before we enjoy something that came and went weeks or months earlier.

erichocean3• 14 years ago

> only available to people with cable TV subscriptions

You do realize that in the US, that covers over 90% of households.

cbsmith2• 14 years ago

I could have sworn I heard this guy talking about how the TV model is great, because the whole distribution channel is outsourced through affiliates who are licensed the content... and then talk about how with the Internet, most content is licensed through distributors, but their advantage is that they don't license the content, so they own the entire experience.

I don't get why everyone is saying he is so rational/logical. Seems like he is talking out of both sides of his mouth.

ebiester• 14 years ago

They outsource costs, the advertizing affiliates do (through things like triple play) and support (nobody calls HBO when they can't get to the channel.) These are extra costs they would have to take on.

On the other hand, on the Internet, they have a relatively small library compared to their competitors, who have both a large library and scaled support. And much of the content is advertising-based, which doesn't work with HBO's model.

It seems to make sense to me.

alttag• 14 years ago

And they get (or would get) these same benefits by reselling content through Amazon's video-on-demand, iTunes, Hulu+, Netflix, or any other number of streaming Internet outlets.

So, the argument makes sense in part, but it still comes across like a rationalization of previous poor decisions.

cbsmith2• 14 years ago

> They outsource costs, the advertizing affiliates do (through things like triple play) and support (nobody calls HBO when they can't get to the channel.) These are extra costs they would have to take on.

The way it was phrased, I sure got the idea that he was saying HBO was at a net advantage with that model.

erichocean3• 14 years ago

I've started using HBO GO, both on my iMac and especially on my iPad.

I must say that I do like it. I'm glad that there are still places where I can pay money and get content like Game of Thrones. I hope that doesn't go away; if it does, we all lose (yes, even the pirates).

I really don't get people bitching about the cost. I spend more on a date with my wife than the entire cable + HBO package, which we get to use all month. It's more than worth it, even if I never watched anything else but HBO.

kldavis42• 14 years ago

Why are people bitching about the cost? Just think about it. There is one show I want to watch that I can't get watch on netflix/hulu/OTA, which is Game of Thrones. Can you really justify $80+/month for 4 episodes of a single show? If you really watch a lot of cable tv already, then sure, it is not a lot of money, but paying $10-$20 an episode is ridiculous.

erichocean3• 14 years ago

For over 90% of the households in the US, it's not "80+/month", it's $15 – for four episodes a month.

Furthermore, HBO provides all of their Game of Thrones stuff on demand, you only need to get HBO for 1 month to actually watch everything, if you wait until the last month of the series.

HN people (at least in the US) are in a bubble when it comes to cable TV, and the economics thereof.

This comes to mind: http://xkcd.com/793/

sandieman• 14 years ago

Prediction: within 2 years they will have a "subscribe now" on YouTube for HBO and other networks and in 3 years YouTube will be the biggest affiliate for them.

PaulHoule• 14 years ago

I'll grant all that, but here's my 2 cents.

I love television as an art form. I appreciate good writing, good action, good direction, and all of the other skills that go into TV. I like specific shows, and I like the ability that television has to tell huge stories that spread out over years.

Between work, excercise, and other forms of entertainment, I don't have a lot of time to watch TV, so my idea of a "premium experience" is being able to watch shows I really value when I can fit them into my life.

I've got no interest in broadcast TV or cable. I remember doing a business trip that took me to NYC and LA and seeing both cities saturated with billboards for a new show. I thought heck, maybe I'll watch it. Well, I'm working like a dog in front of the computer and going to back-to-back meetings, so the only time I've got to go for a run out in Hollywood is late in the evening, so I miss the 10:00 start of the show and get back to my hotel at 10:10.

When I do watch cable, I'm always shocked at how hard it can be to find something entertaining. Sometimes it seems like nothing but Spongebob Square pants and reality shows about people who clip coupons and hang out at pawn shops.

There's no doubt at all that some great T.V. is being made today, but the conventional distribution system mostly shows junk that is subsidized by a system that doesn't let people speak with their dollar.

amalag• 14 years ago

I am sure HBO would love to have people like you who don't have cable as subscribers. I don't have cable because I don't see anything there of value, since I can watch Jon Stewart and Stephen Colbert on Hulu and get movies on Netflix. A coworker also cut his cable. He couldn't justify almost $80 a month. He said the only thing he watched was HBO and another premium channel.

The CEO's point was it is difficult to target cable cord cutters because they have already have a business model that is profitable. The telephone salesman cannot say "You can take HBO with your $50 cable or you could just buy a $10 internet subscription plan for HBO, please buy cable anyway"

They cannot retool their business to compete with standalone Netflix. I would love for them to offer there shows on Netflix like AMD does, but oh well. I personally have pirated true blood last year, but I am now just going to wait 1 year to see the next season as I waited to see game of thrones when it comes on Netflix DVD. I guess it doesn't put much money in HBO's pocket, but I guess it's better than pirating. But I know people who gotta have their fix.

I appreciate this synopsis of the original article. The Forbes article really was linkbait.

cube13• 14 years ago

>The CEO's point was it is difficult to target cable cord cutters because they have already have a business model that is profitable. The telephone salesman cannot say "You can take HBO with your $50 cable or you could just buy a $10 internet subscription plan for HBO, please buy cable anyway"

I would agree with this, if HBO didn't already have the infrastructure to target cable cord cutters. If HBO had to develop their own streaming service, authentication, a pricing model, etc., then he'd have a point. It would take at least a year to get to that point, on both the technology and legal side. The argument could be made there that the investment isn't worth it, considering the current earnings.

The problem is that they have already done that. HBO Go. So it really doesn't make sense why they're not trying to get non-subscribers. I think that the fundamental problem with the HBO execs is that they've convinced themselves that the only market they should target is cable subscribers. But that market is shrinking, due mostly to services like Netflix and Hulu, especially in the demographics that they're targeting.

msfd• 14 years ago

The author published a correction :

"Note: An earlier edition of this piece described comments made by Eric Kessler that described his views of cord-cutting as a fad or “temporary phenomenon.” Kessler said that he viewed cord-cutting as “minimal” and a result of “macroeconomic conditions” indicating that should economic conditions improve cord-cutting will decrease. To me and others who have written about this, those words indicate that cord-cutting is a problem that will eventually go away as the economy improves – hence a fad or temporary phenomenon. It’s important to note that Kessler himself did not say “fad” or “temporary phenomenon” but his words and sentiment in the video do imply that he thinks the problem of cord-cutting is small and will likely go away, and that targeting the cord-cutting audience doesn’t make business sense. Apologies for the lack of clarity here."

Why HBO's president panned Internet streaming (and Forbes' linkbait)

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