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Cable Technology Feature Article

October 25, 2013

HBO Takes Another Step Towards A La Carte with Comcast Deal

By Tara Seals, TMCnet Contributor

In a move that could be a harbinger of a new era for premium TV networks, Comcast (News - Alert) is readying a new, stripped-down hybrid residential package that will offer unbundled HBO.

The premium cable net will now be available to customers that don’t subscribe to Comcast’s TV tiers—a big cultural shift on the cable MSO front. The package, dubbed Internet Plus, and will include a limited basic TV package with local broadcast channels plus QAM (20 channels total), VOD, Comcast's streaming video service StreamPix, a 25Mbps broadband tier and the plum HBO/HBO GO. According to reports, it’s launching with a promotional price of $60 to $70 for six months, before going up to $70 to $80 per month.

The news is another clue as to where HBO sees its future. Earlier in the month, it began offering episodes a la carte via Google (News - Alert) Play, marking the first time in the United States that it has been decoupled from the cable distribution chain. HBO is now granting access to some seasons of seven popular series: Veep, Girls, Boardwalk Empire, The Wire, The Newsroom, True Blood and Game of Thrones. Viewers without an HBO subscription can purchase episodes for $2 - $3 each, and $19 - $29 for a full season. It should be stressed however that the offering is limited, with current-season fare, according to user comments—difficult to find.

Netflix CEO Reed Hastings has always called HBO his biggest competition, drawing parallels between the two’s shared model of airing movies within a reasonable window from their theatrical release. HBO’s 2010 launch of HBO GO, which gives pay-TV subscribers access to all HBO content across mobile devices and the Web, upped the ante. And since then, Netflix’ Emmy-winning original content strategy has heaped on the comparisons, as series like Orange (News - Alert) is the New Black and House of Cards have held their own against premium programming from more traditional outlets.

The question is, could—and should—HBO move beyond its existing walled garden model to pursue a piece of the Netflix over-the-top (OTT) pie? HBO GO has 6.5 million registered users, compared with about 29 million for the TV service. HBO already sells itself a la carte in the Nordics, but elsewhere in the world has always relied on its pay-TV distribution partners for the lion’s share of its revenue.

"Right now we have the right model," HBO's Chief Executive Richard Plepler said back in March, at the Season 3 premiere of Game of Thrones. "Maybe HBO GO, with our broadband partners, could evolve."

He stressed however that, “we would have to make the math work." He suggested that HBO GO could be packaged with a monthly Internet service, so that customers could pay $50 a month for broadband and an extra $10 or $15 for HBO to be packaged in with that service, for a total of $60 or $65 per month, Plepler—far cheaper than a typical full cable+HBO package, which comes in at $100+ per month.

Apparently, Comcast has made the math work. But it’s also keeping a stranglehold on its role as an HBO distributor. Whether HBO would tie up HBO GO with other ecosystem players outside of cable’s warm embrace—like an Amazon, for instance, or a mobile operator—remains to be seen.

Edited by Stefania Viscusi

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