Netflix CFO Urges HBO To Offer Online Subscription Service

hbograbThe TV-viewing public wants HBO Go without first having to pay for basic cable and HBO. Millions of people have signed petitions begging the company to offer such a service, and now the CFO of Netflix is asking why the premium network hasn’t offered an online subscription service yet.

“We believe that if they were direct-to-consumer, there would be materially more subscribers that would pay for it in the U.S.,” Netflix CFO David Wells argued at a Goldman Sachs investors conference earlier today.

I’ve previously stated my own theories regarding why HBO would be reluctant to sell HBO Go at a price that would be palatable to consumers and competitive with Netflix, Hulu+ and others.

It mainly comes down to the fact that HBO has never been a consumer-facing business. All of its dealings with consumers have been through cable and satellite operators. It would require massive amounts of investment and new (or outsourced) staff to handle all the additional billing, customer service, and tech support required of an independent subscription service. Perhaps if HBO parent company Time Warner still owned Time Warner Cable, it could have shared some of that burden, but that’s not an option now. Companies like Netflix, Amazon, and Apple had the groundwork for this customer-facing aspect of the business in place when they each got into streaming video services.

The other question is whether or not HBO could convert all 30 million of its current TV subscribers in the U.S. to paid online users. If so, that would put it on par with Netflix’s domestic customer base — and would a new HBO service siphon customers away from Netflix? It’s possible they could coexist peacefully, as HBO has never allowed any of its original programming to be streamed on Netflix and HBO Go’s back catalog of non-exclusive content is not as vast or varied as Netflix’s.

Also of interest to this discussion were comments made by News Corp CEO Robert Thomson at the same Goldman Sachs conference. News Corp is part owner of Australian pay cable network Foxtel, which airs HBO’s Game of Thrones in that country. According to Thomson, even though Foxtel subscribers have access to the series, 20% of them are still illegally obtaining the show via BitTorrent, often because they don’t want to wait for the short lag between the U.S. debut and its showing in Australia.

“People are just in the habit of illegal downloads,” Thomson told the audience. “Australians have very bad habits – piracy happens to be one of them.”

Forgetting for a moment his dig on Australians, this brings up a final valid point of comparison between the HBO Go model and that of Netflix and other streaming services — how they treat serialized content.

With some rare exceptions, HBO Go users are required to wait for each new episode of a show to air before it lands online. Conversely, Netflix has launched several serialized shows — House of Cards, Orange is the New Black, Arrested Development — where an entire season goes up at once. If HBO were to target the online subscription market and offer a competing product, it may need to rethink how it doles out new content as paying customers might not be happy with waiting seven days just because that’s what the TV schedule dictates.

Regardless, it is an inevitability that HBO will someday offer an online subscription service. But will it simply be an HBO Go that users pay for, or will it be an attempt to compete directly with Netflix?

Netflix exec: HBO would have many more customers if it sold online-only subscriptions [GigaOm]
Subscribers Pirate Game of Thrones Even Though They Already Paid For It [TorrentFreak]