Since 2012, HBO has been offering a standalone streaming service to customers in parts of Europe, and it’s now reportedly planning on expanding that type of over-the-top service to other European and Asian markets. Yet the cable network still maintains that it has no plans to try it out stateside. We believe it could happen, but it would first require a handful of changes.
1. Network Infrastructure
HBO would need to sink a lot of money into improving its streaming service. Every time there is a major event episode on one of its more popular shows, HBO Go service in the U.S. crumples like tinfoil due to the heavy demand from people trying to watch online.
While lots of people gripe whenever this happens, HBO can fall back on the claim that HBO Go is a free supplement to a paying subscriber’s account. You may not be able to watch the Game of Thrones finale online, but it’s still airing on the channel and via your cable company’s on-demand.
But if HBO Go were to be a standalone service with millions of users who have no other way of watching their favorite shows, then it can’t afford the downtime or hit/miss streaming quality that it currently experiences during periods of high demand.
And while there might be millions of people who say they would jump at the chance to sign on to a standalone HBO Go, the reality is that only a fraction of them would actually do so immediately, meaning HBO would have to sink money into network improvements in the hope of eventually having a large audience.
2. Paying The Cable Companies… Possibly Twice
As we’ve pointed out before, HBO doesn’t have the independence of a company like Netflix or Amazon. It is just one piece of a huge entertainment giant, and a good chunk of that business relies on carriage fees and ad revenue from the cable companies. And those cable companies enjoy a nice piece of that $12/month or so that HBO subscribers pay every month.
A standalone HBO Go would result in cable customers cutting the cord, meaning less money for cable companies and fewer viewers for Time Warner’s other cable offerings.
Look at what the cable companies have done to Netflix in the last year, allowing its data to bottleneck to the point where it had no choice but to make deals with Comcast and Verizon to pay for improved access to consumers.
The same thing would happen to HBO Go, as the cable companies could make up a tiny bit of the lost revenue from cord cutters by forcing HBO into paying for direct connections to their networks.
Another way in which HBO could placate the cable industry is by allowing it to do the billing for a standalone HBO Go. Some cable companies are already offering packages that are just broadband service with a handful of basic cable channels and HBO (and HBO Go); it wouldn’t be much of a stretch to just remove the pay-TV portion of that amount from the equation.
Which brings us to…
3. Create A Support Staff
Even if cable companies do much of the billing, HBO would still have to deal with creating a new level of customer support that it hasn’t had to deal with thus far.
Sure, people complain when HBO Go goes out or acts goofy. But as we mentioned above, these people aren’t actually paying for HBO Go, even if that’s their primary way of watching shows. HBO can justify a sparse tech support staff.
But when people are paying specifically for your online service, it’s a different story.
The Wall Street Journal theorizes that HBO’s expansion of its online-only service overseas may be a test run to learn how best to handle billing and customer service before it even considers planting that flag here in the U.S.
4. Set A Price
Netflix is only $8/month for a large selection of streaming TV shows and movies. Hulu Plus is the same price and offers first-run network programming (albeit with commercials) that Netflix doesn’t.
Amazon Prime, even at its recently increased rate of $99/year, only comes out to $8.25/month, and that offers other perks beside the streaming video library. Speaking of which, that Prime library recently added a bunch of HBO’s TV shows and movies.
So what price would you pay for HBO Go on its own? While TV customers may be okay paying $12/month for HBO on their cable bills, would they be fine paying that amount for just the online service, when — in its current state — it offers only a comparatively small selection of movies to bolster its catalog of original programming?
And that original programming can only provide so much value, as the average HBO season only includes 8-12 episodes, and many shows only air for a few seasons. Shows like The Wire or Deadwood may be classics, but it remains to be seen if they are enough to sustain a large enough user base.
True Blood will be ending in a few weeks and it’s unrealistic to imagine that Game of Thrones will be able to go more than a few more seasons. Ratings for the first season of True Detective were good, but with an entirely new cast and story coming in its eventual second season, who knows if that feat can be repeated?
Remember, most cord-cutters aren’t going Internet-only out of some sort of anti-TV ethical principle — unless that principle is “I’m not paying too much for TV.” No, cord-cutters are really just expense-cutters who looked at the huge monthly expense of a cable bill and realized they don’t have to pay it to be entertained.
Additionally, some cord-cutters subscribe to multiple services because it may still cheaper than a cable package. But at some point, adding yet another streaming service on top of the existing ones may no longer make sense.
So HBO would need to find a price point that is tempting to cord-cutters… and which isn’t too high during those down months when its original programming is lackluster… and on which it can still turn a profit.
We don’t envy the person at Time Warner that has to do that math.