HBO Is Preparing for Life Beyond Cable
In what could be the most exciting single development for cord-cutters and their quality television since Hulu launched six years ago, the head of HBO hinted Thursday at the development of viable, legitimate standalone streaming service for people who don't pay for cable TV — any cable TV, not just premium. They would probably still have to pay for cable-company operated Internet, and it's far from a done deal, but still: Everyone's pretty excited, and it might even be pretty cheap.
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"Maybe HBO GO, with our broadband partners, could evolve," HBO CEO Richard Plepler told Reuters in an interview, expanding on a plan that he's hinted at before. But with that one sentence — even with the "maybe" — a lot of people on Twitter are jumping at the concept that HBO could be packaged with Internet fees, and without a full cable package, sometime in the near future. And the move would make sense: Plenty of Internet providers are also cable companies, and HBO can't just go an ruin its existing relationships with the very providers that make it so much money already. And although Plepler offered some possible price breakdowns — $10 or $15 per month for the HBO GO add-on — he conceded that "we would have to make the math work." The math in HBO's current setup, tied to cable packages at a premium, works out very much in its favor, as Derek Thompson has pointed out over at The Atlantic (and continues to point out on Twitter today).
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That's not to say HBO couldn't figure out some price point at which the broadband add-on would make enough money to cushion the network from subscribers who would cancel their entire cable packages... just to get HBO via broadband. (Those subscribers would undoubtedly piss off some cable companies, but they would undoubtedly be low in number.) Netflix has managed to figure out a way to make an economically viable subscription service, now with original programming. But Netflix made that transition without relying on the infrastructure of cable companies — it does its own marketing, and fulfillment, and customer service. It's just too soon to tell at what price point HBO could pull off an extraction from its longstanding cable-TV marriage. A lot of people, including Thompson, have argued that it would cost way more than viewers want to pony up. But nobody has put out an actual number, and viewers love their HBO, and their Hulu, and their streaming TV shows.
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The cable-free HBO fee would certainly have to amount to more than $7 a month, since that's what HBO gets now from each cable subscriber. And arguably it costs more to offer HBO on its own because of all the benefits that come from a business model that exists inside a cable bundle, with its built-in marketing, infrastructure, and more. But that $10-$15 per month figure thrown out by HBO is awful low for so early in the process.
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Is that possible? HBO has already built the tubes for the stuff: HBO GO exists, and it works. So, HBO would just need to cover customer service and marketing and billing and that kind of corporate development, along with licensing and producing some very expensive television. If it works out some sort of cut with Internet companies — again, many of which tend to be cable-TV providers — then HBO could theoretically rely on them for what it used to get out of the cable bundle. If not, HBO could always hike the price, depending on how big they need to scale and how great their programming continues to be. (Game of Thrones don't come cheap.)
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In any case, never forget: HBO never promised us anything. Its top official just said he is aware that people who don't have cable packages want their Girls and their True Blood on the go, and that he is very much aware of a possibly popular solution.
