Don't Plan on A La Carte HBO Go Anytime Soon

Why can’t you buy a subscription to a digital streaming service like HBO Go without being a cable TV subscriber? Because HBO would put its relationship with the cable TV providers in jeopardy, and the cable TV providers supply
parent Time Warner with the bulk of its revenues.

As Gabriel Rossman points out in a column in The Atlantic: “Cable is a total cash cow and a more flexible business model means lower revenues.” Cable’s business model involves bundling channels in addition to offering premium channels like HBO for an added fee. Time Warner, HBO’s parent, has a business model that involves getting as many of its channels -- including HBO -- onto cable TV packages as it can, for which it receives carriage fees. Time Warner might make lots of money from HBO subscriptions, but it makes even more from carriage fees. That means if HBO were to go rogue, it would put Time Warner’s carriage fees in jeopardy, because most of the rest of its networks are not in high enough demand to live outside of a cable bundle. As Rossman says, letting HBO sell directly to consumers would be akin to Disneyland selling a la carte tickets to Splash Mountain for $20 without requiring the $80 park admission fee. The current model, he adds, sets the consumer up for “a perfect storm of price discrimination.”

Unfortunately, the market is not yet able to demand change. The target market for a la carte HBO Go would be households with broadband but no cable TV, which is only about 5% of the U.S. total. Unfortunately, Rossman says, this is dwarfed by the 20% of households that have cable but no broadband. Moreover, of the 70 percent of households that have both, most aren’t familiar enough with streaming video through devices like Xboxes and Blu-Ray players to recognize that they could cut the cord, anyway. In other words, don’t hold your breath on a la carte HBO Go happening anytime soon. 

Read the whole story at The Atlantic » Recommend (1)
3 comments about "Don't Plan on A La Carte HBO Go Anytime Soon ".
  1. Michael Kaplan from Blue Sky Creative , May 10, 2012 at 12:45 p.m.
    This was exactly the dilemma faced by Apple when it entered the smartphone business a few years ago. Carriers wouldn't let the handset makers introduce all the new features they wanted, less they risk losing revenue. And handset makers were afraid to do too much out of the box thinking because they didn't want to upset their relationship with the carriers. Enter Apple, which completely rewrote the rules. With that in mind, I can't wait for Apple to deliver something substantial on the video side. I've been wanting to cut the cord for a long time, but there hasn't been an acceptable substitute. Hope one comes soon. I'm tired of paying for channels I don't watch, and that clutter up the program guide. The tipping point is coming, a lot sooner than the cable companies want to believe.
  2. Geoff Simon from Simon Search Marketing , May 10, 2012 at 1:53 p.m.
    I hope you are right Michael. I do think the 5% who have broadband and not cable being the only addressable market isn't quite right though. It's the 70% of people that don't know that you have to reach and get on board. Maybe Apple can do that, maybe Google can do that, hopefully someone can though, and you got to have HBO on board, which, unless you got all the people who wanted HBO directly and were willing to pay committed beforehand somehow i don't know.
  3. Roy Moskowitz from Reciprocal Results , May 10, 2012 at 2:40 p.m.
    I was annoyed a couple of weeks ago when HBO GO wouldn't work when I was traveling abroad (not in a high censorship country). It kept telling me I could only log on from America. If I'm paying for a cable subscription, I should be able to log into HBO GO when ever I want, no matter where my computer or smart phone are located.