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Cable Technology Feature Article

August 04, 2014

HBO Mulls No-Cable, OTT Expansion Overseas

By Tara Seals, TMCnet Contributor

HBO is examining its options to expand the over-the-top (OTT) tactic for programming distribution that it has already taken in the Nordics.

According to the Wall Street Journal, the Time Warner (News - Alert) Inc. unit is looking to launch a digital-only, Netflix-like service in places with plenty of broadband infrastructure and not a lot of existing HBO pay-TV business. Candidates could include Turkey and Japan, sources said.

It launched its OTT service in 2012 in Denmark, Finland, Norway and Sweden, in what was the first move by the premium network to go direct to consumers. Its model has always been to partner with pay-TV distributors, through which it offers subscriptions, and this is unlikely to change domestically or anywhere where it has pre-existing arrangements with cable, satellite and IPTV (News - Alert) providers. But that leaves plenty of room for growth elsewhere. Unlike in the U.S., in certain markets pay-TV subscriptions are not common, and going OTT will offer it an opportunity to reach otherwise unreachable new fans.

The move to OTT internationally is of course geared to boost its numbers as its U.S. bread-and-butter market hits the saturation mark. At home, HBO has added just 400,000 subscribers between 2007 and 2013, according to SNL Kagan, forcing it to uncover revenue by raising programming costs for distributors—to the tune of 4 to 5 percent per year according to the research firm. That’s worked so far, in no small part due to the wild popularity of series like Game of Thrones and True Detectives—but there’s an inflection point to that that HBO is no doubt eyeing.

Meanwhile, it saw 10 million user additions last year internationally; it has its own channels in 60 countries and licenses HBO programming to a range of cable nets in places like the U.K. 

HBO will of course run into competition on the OTT front; in addition to local streamers, Netflix and Amazon have been expanding globally—and at the end of the year, Netflix handily beat it in the Nordics. But the margins are good for OTT delivery and the concept is likely of the “can’t hurt might help” variety as long as it chooses the right markets.

HBO raked in $1.8 billion in operating profit last year, which the WSJ pointed out is about one-quarter of Time Warner's $4.9 billion annual revenue. 

Edited by Maurice Nagle

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