HBO's OTT Offering Could Change Pay-TV Game

HBO’s coming entry into the over-the-top world could be the thing that brings wholesale change for the entire pay-TV industry. 

According to Parks Associates, 17% of U.S. broadband households said they would be likely to subscribe to the premium channel’s video service once it is offered later this year. Of them, 91% already subscribe to a pay TV service, and about a half of those subscribers said they would consider canceling their pay-TV service after subscribing to HBO’s OTT offering.

“That intent doesn’t necessarily translate to that behavior,” Glenn Hower, research analyst at Parks Associates, tells Marketing Daily. “But that number is [still] pretty alarming. It’s something the industry needs to think about as a whole.”

The survey of more 10,000 U.S. broadband households indicates that HBO’s introduction will create competitive challenges, not just for OTT companies such as Netflix and Amazon, but also pay-TV providers in general. The pressure is only set to increase as other companies, like Dish Network’s SlingTV (which will include networks such as CNN, ESPN, TNT and TBS), enter the market. 

“I don’t think it was HBO’s intent to cannibalize the system. It was more of a side effect.” Hower says. “Television is not dying, but it is evolving.”

Indeed, many of the pay-TV companies have already begun to shift their pricing models, Hower says. However, it could be some time before they move to a completely à la carte model (where consumers only pay for the networks they want, rather than packages), if ever. 

“I think consumers will see the price difference would be negligible,” Hower says. “But it does mean providers will have to start looking at their models. I think we’re already seeing small steps toward unbundling. But it’s not something that’s going to happen overnight.”

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