

Why HBO's president panned Internet streaming (and Forbes' linkbait) - dko
http://dcurt.is/hbo-forbes-journalism

======
ecaradec
Their strategy is smart and reasonable if people perceived HBO as delivering
great shows that are worth paying extra useless channels to get, which I don't
think it is (but I'm french and not very exposed to their marketing ).

I fear that HBO is living in the Bubble of their Brand like so many companies,
thinking they are the best thing ever and that customers should be grateful
whatever way they accept to provide stuff. There is a trend toward simpler
deals now where you pay for what you want, not for 3, 4 goodies you never
asked.

~~~
jan_g
I think that HBO is the best part of my TV subscription. They offer unlimited
viewing of their content for flat rate (10EUR/month). Included is also web
streaming (HBO GO), so that I can (and do) watch the movies on various
computers in the house.

Compare this to various 'online movie rentals', where I'd have to pay
2EUR/movie.

~~~
chc
Yeah, it costs that little if you're already paying through the nose for a
cable plan. If you're not, you have to pay for a cable plan just to get HBO
GO, so it works out to something like $120 a month. You'd have to watch a lot
of movies to approach the actual cost of HBO.

~~~
jan_g
But I'd have cable or iptv subscription in any case. HBO or not. Being without
tv is a no-go scenario in our family.

Besides, the cost is nowhere near $120. I pay to my provider 35EUR for 20/20
internet access + 10EUR for iptv + 10EUR for HBO. So the tv part of my monthly
bill is 20EUR.

~~~
nextparadigms
I think the HBO situation is better in Europe, probably because they were not
so hyped in Europe, and they and not that many people are using it.

------
dcurtis
I just want to add that the other HN story title was completely incorrect
linkbait as well: "HBO CEO: '...an internet-based model [for TV] is just a
fad'".

It wasn't HBO's CEO, and he didn't use the word "fad." That word was from the
Forbes writer. Also, it wasn't a direct quote.

------
rflrob
> What you don't want to do is to pursue a distribution channel over here [ed:
> the internet], where you think, well, let's go around the affiliate and
> we'll get a couple hundred thousand subs. But the promotional, and packaging
> support we get over here [ed: the affiliate networks], which, by the way, is
> the foundation of our 30 million subs

I'll believe they've done the market research to believe that "couple hundred
thousand" number, but I have a harder time seeing that offering their own,
independently subscribable[1] distribution channel will affect their core
business model much more than piracy already is. From my perspective, they're
just leaving money on the table for no clear gain.

[1]bear in mind that it's only whether or not you can subscribe to HBOgo
independently of owning a tv and basic cable subscription that should be the
issue, since they clearly believe offering streaming is good for both them and
their customers.

~~~
dasil003
Did you not read about the benefits the affiliate is bringing? HBO is good
enough to sell cable subscriptions. There's a symbiotic relationship there.

Assuming that they profit per subscriber is the same either way, what you're
trying to argue is that there is not a single person who would cut their cable
in favor of an official HBO streaming service who hasn't already done so in
favor of piracy. Well either that or you think they'll reclaim a lot of
revenue from pirates, but that still screws the affiliate which has a
significant downside that you're not accounting for.

------
PaulHoule
I'll grant all that, but here's my 2 cents.

I love television as an art form. I appreciate good writing, good action, good
direction, and all of the other skills that go into TV. I like specific shows,
and I like the ability that television has to tell huge stories that spread
out over years.

Between work, excercise, and other forms of entertainment, I don't have a lot
of time to watch TV, so my idea of a "premium experience" is being able to
watch shows I really value when I can fit them into my life.

I've got no interest in broadcast TV or cable. I remember doing a business
trip that took me to NYC and LA and seeing both cities saturated with
billboards for a new show. I thought heck, maybe I'll watch it. Well, I'm
working like a dog in front of the computer and going to back-to-back
meetings, so the only time I've got to go for a run out in Hollywood is late
in the evening, so I miss the 10:00 start of the show and get back to my hotel
at 10:10.

When I do watch cable, I'm always shocked at how hard it can be to find
something entertaining. Sometimes it seems like nothing but Spongebob Square
pants and reality shows about people who clip coupons and hang out at pawn
shops.

There's no doubt at all that some great T.V. is being made today, but the
conventional distribution system mostly shows junk that is subsidized by a
system that doesn't let people speak with their dollar.

~~~
amalag
I am sure HBO would love to have people like you who don't have cable as
subscribers. I don't have cable because I don't see anything there of value,
since I can watch Jon Stewart and Stephen Colbert on Hulu and get movies on
Netflix. A coworker also cut his cable. He couldn't justify almost $80 a
month. He said the only thing he watched was HBO and another premium channel.

The CEO's point was it is difficult to target cable cord cutters because they
have already have a business model that is profitable. The telephone salesman
cannot say "You can take HBO with your $50 cable or you could just buy a $10
internet subscription plan for HBO, please buy cable anyway"

They cannot retool their business to compete with standalone Netflix. I would
love for them to offer there shows on Netflix like AMD does, but oh well. I
personally have pirated true blood last year, but I am now just going to wait
1 year to see the next season as I waited to see game of thrones when it comes
on Netflix DVD. I guess it doesn't put much money in HBO's pocket, but I guess
it's better than pirating. But I know people who gotta have their fix.

I appreciate this synopsis of the original article. The Forbes article really
was linkbait.

~~~
cube13
>The CEO's point was it is difficult to target cable cord cutters because they
have already have a business model that is profitable. The telephone salesman
cannot say "You can take HBO with your $50 cable or you could just buy a $10
internet subscription plan for HBO, please buy cable anyway"

I would agree with this, if HBO didn't already have the infrastructure to
target cable cord cutters. If HBO had to develop their own streaming service,
authentication, a pricing model, etc., then he'd have a point. It would take
at least a year to get to that point, on both the technology and legal side.
The argument could be made there that the investment isn't worth it,
considering the current earnings.

The problem is that they have already done that. HBO Go. So it really doesn't
make sense why they're not trying to get non-subscribers. I think that the
fundamental problem with the HBO execs is that they've convinced themselves
that the only market they should target is cable subscribers. But that market
is shrinking, due mostly to services like Netflix and Hulu, especially in the
demographics that they're targeting.

------
chaostheory
HBO's CEO is rational. When I read the excerpts though, it reminded of the
time before ink jet printers were dominant. I believe Epson on top, and they
were giving a lot of valid reasons for sticking with dot matrix production
without a good plan to transition into ink jet printers. Well fast forward
some years later, and you have HP eating their lunch.

------
sirclueless
> It's not really HBO's fault that Game of Thrones is pirated so much. It's
> the fault of the entire ecosystem.

It's the fault of the entire ecosystem that a company is targeted by pirates
when it chooses to make a small number of high-quality TV shows with excellent
production value and put them behind an expensive paywall only available to
people with cable TV subscriptions?

I mean, I understand the rationale of HBO in accepting the cost of piracy in
order to maintain a lucrative symbiosis with cable affiliates. But I'm sure
they recognize that in doing so they cause a significant amount of piracy, and
it harms everyone in the TV business, not just HBO.

There's basically two driving forces behind piracy. One is price, but there is
a good argument to be made that people who pirate because they couldn't
otherwise afford to pay otherwise don't actually affect the bottom line very
much. The other is universality. Ten dollars a month to a usenet provider or
VPN service will give access to every single major movie, TV show, and album
within a few days of release. It comes in multiple DRM-free formats, and can
be played basically anywhere.

So long as piracy has a distinct service and price advantage over HBO, they
are encouraging piracy. And the worst part for TV producers is that there is a
negative network effect: once someone spends the opportunity cost to pirate
Game of Thrones, the marginal cost of pirating something else goes way down,
and services that do compete favorably with piracy from a service perspective
like Netflix and iTunes suffer as well.

~~~
cubicle67
_It's not really HBO's fault that Game of Thrones is pirated so much_

interestingly, Game of Thrones, Season Two, is available on iTunes here in
Australia and follows only 10 days after US release. We pay rather more here
than in the US, but at $28 for a season pass, it's cheaper than the cost of
the DVDs when they come out

~~~
kldavis4
Interestingly, Game of Thrones season 2 is not available on iTunes in US.
What's up with that? I wonder if it is relating to cannibalizing the US cable
subscriber base as discussed in the article. I would definitely pay for it via
itunes if it were available, even with 1-2 week delay.

------
erichocean
I've started using HBO GO, both on my iMac and especially on my iPad.

I must say that I do like it. I'm glad that there are still places where I can
pay money and get content like Game of Thrones. I hope that doesn't go away;
if it does, we all lose (yes, even the pirates).

I really don't get people bitching about the cost. I spend more on a date with
my wife than the entire cable + HBO package, which we get to use all month.
It's more than worth it, even if I never watched anything else but HBO.

~~~
kldavis4
Why are people bitching about the cost? Just think about it. There is one show
I want to watch that I can't get watch on netflix/hulu/OTA, which is Game of
Thrones. Can you really justify $80+/month for 4 episodes of a single show? If
you really watch a lot of cable tv already, then sure, it is not a lot of
money, but paying $10-$20 an episode is ridiculous.

~~~
erichocean
For over 90% of the households in the US, it's not "80+/month", it's $15 – for
four episodes a month.

Furthermore, HBO provides all of their Game of Thrones stuff on demand, you
only need to get HBO for 1 month to actually watch everything, if you wait
until the last month of the series.

HN people (at least in the US) are in a bubble when it comes to cable TV, and
the economics thereof.

This comes to mind: <http://xkcd.com/793/>

------
msfd
The author published a correction :

"Note: An earlier edition of this piece described comments made by Eric
Kessler that described his views of cord-cutting as a fad or “temporary
phenomenon.” Kessler said that he viewed cord-cutting as “minimal” and a
result of “macroeconomic conditions” indicating that should economic
conditions improve cord-cutting will decrease. To me and others who have
written about this, those words indicate that cord-cutting is a problem that
will eventually go away as the economy improves – hence a fad or temporary
phenomenon. It’s important to note that Kessler himself did not say “fad” or
“temporary phenomenon” but his words and sentiment in the video do imply that
he thinks the problem of cord-cutting is small and will likely go away, and
that targeting the cord-cutting audience doesn’t make business sense.
Apologies for the lack of clarity here."

------
cbsmith
I could have sworn I heard this guy talking about how the TV model is great,
because the whole distribution channel is outsourced through affiliates who
are licensed the content... and then talk about how with the Internet, most
content is licensed through distributors, but their advantage is that they
don't license the content, so they own the entire experience.

I don't get why everyone is saying he is so rational/logical. Seems like he is
talking out of both sides of his mouth.

~~~
ebiester
They outsource costs, the advertizing affiliates do (through things like
triple play) and support (nobody calls HBO when they can't get to the
channel.) These are extra costs they would have to take on.

On the other hand, on the Internet, they have a relatively small library
compared to their competitors, who have both a large library and scaled
support. And much of the content is advertising-based, which doesn't work with
HBO's model.

It seems to make sense to me.

~~~
cbsmith
> They outsource costs, the advertizing affiliates do (through things like
> triple play) and support (nobody calls HBO when they can't get to the
> channel.) These are extra costs they would have to take on.

The way it was phrased, I sure got the idea that he was saying HBO was at a
net advantage with that model.

------
sandieman
Prediction: within 2 years they will have a "subscribe now" on YouTube for HBO
and other networks and in 3 years YouTube will be the biggest affiliate for
them.

