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Cable Technology Feature Article

October 15, 2014

HBO Will Launch Stand-Alone US Streaming Service in 2015

By Gary Kim, Contributing Editor

A crack in the linear video dam is opening. HBO will offer a stand-alone streaming service in the United States in 2015, according to Richard Plepler, Time Warner (News - Alert) chairman and CEO.

Many observers had expected HBO to take the lead in transitioning to a full streaming capability for obvious reasons. HBO always has been sold as a “stand-alone” product, separate from the advertising-supported channels and networks that are part of standard subscription video packages.

Ad-supported channels gain from being bundled with the “most popular” basic channel line-ups, since they are carried on the tiers the most people watch.

That allows them to set advertising rates based on that degree of reach. Outside the standard bundle, most channels would have miniscule potential viewership, and equally-diminished ad rates.

HBO never has been ad supported, and always has had a subscription revenue model.

For that reason, HBO has less to lose than the ad-supported channels by offering its content both as part of a linear subscription video package, and as a streaming service.

That is not to say risks are absent, or negligible. It isn’t clear how many incremental subscribers would buy a streaming HBO service if they did not also have to buy a linear video service first.

But, consider the “buy-through” requirement of an investment of $80 to $100 a month before HBO can be added. That is what HBO is going to test, tentatively at first.

True, HBO does risk getting less promotional support from some of its distributors. But HBO also might gain from going “direct to end user,” because buy-through is not a barrier.

To be sure, HBO is trying to placate its major distributors by emphasizing the primary target is 10 million broadband-only homes, which is projected to grow over time. In those homes, offering HBO as a stand-alone product does not cannibalize linear video, as those homes do not buy a video subscription at the moment.

HBO says it plans to work “with our current partners. And, we will explore models with new partners.”

The larger opportunity is that 80 million U.S. homes do not buy HBO. No details on pricing were announced. But some observers would be quite surprised if as streamed HBO product cost less than the current linear product. In fact, streamed HBO might cost more, as marketing costs borne by distributors will not be available.

Still, HBO’s move is a major crack in the dam.


Edited by Maurice Nagle

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