Commentary

Times Are A-changin' For Premium Entertainment Players

“Come gather 'round people

Wherever you roam

And admit that the waters

Around you have grown

And accept it that soon

You'll be drenched to the bone

If your time to you

Is worth savin'

Then you better start swimmin'

Or you'll sink like a stone

For the times they are a-changin' ”

“The Times They are A-Changin” — Bob Dylan 

Over the past weekend, I was back in my hometown for some family events. I stayed a night with my folks. As I was pulling into the driveway, I couldn't help recall a Comcast commercial that was airing during the holidays. The spot, "Hooking up Grandma's House" is a funny and heartwarming vignette about a grandchild that tweets about entering the "gates of hell,” a/k/a her grandparents’ home, where there are no wi-fi and no premium channels.

Unbeknown to the grandkid, her grandparents follow her on Twitter and see her tweet. Not such the Luddites after all! Of course, the kid was a bit right and the grandparents scramble to upgrade their broadband connection, TV channel line-up and get the latest voice-recognition TV remote. When the grandkids arrive, they are blown away. 

My folks' house isn't that bad since my parents are pretty tech-savvy and enjoy their tech gadgets. Although, I wish they had a faster connection. My main concern for the weekend was being able to stream HBO Now from my phone to their TV via AppleTV. Of course, it was no problem. But it got me wondering about how HBO Now subscriptions are looking since the launch back in April 2015.

As if on cue, HBO released updated numbers this week. The last time I wrote about cord-cutting, the HBO Now app had recently launched and had a strong start. A year into their launch they reached 800,000 subscribers. This week HBO announced the app has 2 million subscribers. A healthy number indeed.

Compared to Netflix's 70+ million subscribers, HBO Now's 2 million can be easy to dismiss. It's not. Netflix is an entrenched player and has a lower subscription cost. Another important point to remember, HBO Now is hugely transformational to their business and a move to where the puck (their customer) is going as cord-cutting continues to gain momentum. HBO Now has a lot of growth left to do and their run rate seems healthy, especially when compared other premium content players such as Showtime, Hulu, Amazon, Dish, and DirecTV. 

If my sample set of friends is any indication, (they've all cut the cord and switched to the Apps (e.g., HBO Now, Showtime Anytime, Netflix), the cord-cutting continues in earnest as consumers want the ability to see what they want, when they want and where they want. Of course, there is a bit of a perfect storm combining connected homes and devices. It the rule and less the exception to visit a friend (or parents) and be able to share movies from tablets and phones to TVs. 

The speed of adoption is about to enter “The Second Half of the Chess Board.” My last post talked about the battle for connected homes (e.g., Amazon Echo, Google Home) and the rapid proliferation of those devices combined with apps like HBO Now and all their competitors. 

Entrenched players and distribution have been seeing their business erode. I predict the pace of erosion will double this year. And the businesses that can't transform their distribution models will start to see high single-digit or even double-digit declines this year. The canary in the coal mine, for me at least, will be seeing my folk's cut the cord and move to apps. And they're already talking about it!

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