HBO has long been regarded as a major asset to cable operators. As a premium cable service, it charges subscribers an incremental fee above a basic cable subscription, that is then split with the cable operator. And viewers that want HBO must first buy cable. Cable operators like this arrangement very much.
HBO continues to draw viewers with its mix of movies and original series. Its shows, like Game of Thrones, gets terrific press. But HBO has its challenges, too. For one, there is no traditional advertising on the network. Content is shown without commercial interruption. So HBO must find additional revenue through resale of content via syndication and DVD. And as we know the DVD revenue model. HBO must also recognize that cable subscription is dropping too. "Increasingly, consumers are dropping traditional cable packages to rely solely on subscription services like Netflix or a la carte services like Amazon Instant Video." Ultimately, less cable customers means less customers buying HBO.
Seeing these changes in the distribution landscape and watching as their authenticated TV Everywhere approach, HBO GO, has found value. "HBO GO users can access content via a laptop, tablet, phone, through a
gaming console, or other streaming devices. The service has 6.5 million
registered users versus 29 million for HBO as a whole." HBO may just be considering a major new disruptive revenue model. Offering HBO GO without an HBO subscription. Not an easy change to make. Current contracts with cable operators may have clauses that must be dealt with. Will HBO work with its cable operators to construct such a model or go outside the wall to sell directly to over the top (OTT) companies?
As HBO is owned by Time Warner and also sells its basic cable networks like TNT and TBS to cable operators, it may be problematic to work outside the existing model. A collaborative, partnership model makes more sense for the large company. At the same time, the web knows no geographic boundaries. Cable operators would have to create an online partnership, like Hulu Plus for example, to sell and OTT only subscription to channels. Broadband has been a real game changer to cable and the rules have yet to be written. No opportunities continue to emerge.