I certainly understand the motivation for this but HBO is actually in a difficult position.
- HBO drives a lot of cable purchase
- Some of that money goes to the cable companies for data carriage
- The cable companies know HBO sells cable
- Any alternative distribution means risks the cable companies losing income
- Cable companies losing income means that HBO risks either being dropped from the cable companies or having to offer them a bigger slice of the pie (since distribution is now non-exclusive)
It is a huge risk for HBO to jeopardize their cable subscriber income with a direct-to-market model.
That being said, I won't pay $100+/month to watch just HBO so do the math on that.
What really annoys me is that this goes so far as affecting, say, iTunes releases. HBO only releases shows on iTunes (if they release it at all) just prior to the next season starting to drum up more interest. That's a trap and I'm not falling for it.
This all goes back to why a la carte cable will never happen (given the current power structure and regulatory environment). It either means people will spend less on cable or things will be more expensive so it won't be worth it. Either way the cable companies lose. Content creators also lose because no one wants to take the risk of losing what is otherwise guaranteed income (a slice of every cable bill).
Years ago, Hollywood went through a shakeup splitting content creation from distribution . It's really time for the same thing to happen with all content industries. We need to separate:
1. Content creation: studios like HBO;
2. Distribution: cable companies like Time Warner and Comcast; and
3. Infrastructure: the actual last mile, cable or fibre infrastructure.
Of course the political likelihood of that happening is essentially zero.
EDIT: to clarify this point, I don't believe cable companies would pursue the nuclear option of dropping HBO. However what the cable companies have now is essentially an exclusive arrangement with HBO. With implied or otherwise, HBO earns a premium for this in terms of how big a cut the companies get. Providing a means to bypass the cable companies would sooner or later result in a higher cut being paid to them, less marketing of HBO by the cable companies to its customers, etc.
Basically there is an economic cost to breaking exclusivity whether it is explicit or not.
But, given that many of the larger ISPs (at least those available to residential customers in my area -- Comcast and Verizon) are owned by companies that also provide cable (and telephone) services, what's to stop them from simply bundling cable service with your internet service and charging a bunch extra? I realize that not everyone has this problem, but in many areas there's almost an "information monopoly" with regards to web service.
The fear isn't cable channels cutting HBO. The issue is consumers cutting their cable subscription. The single biggest danger to HBO is consumers getting rid of cable.
The AMC network owns AMC and a few artsy channels I've never heard of. Time Warner owns HBO, TBS, CW, TheWB, WarnerBrothers, Kids WB, Cartoon Network, Adult Swim, CNN, and a little more. I've heard that HBO gets $7 per each of it's 29 million subscribers. The parent company, TimeWarner, gets an even larger number per cable television subscriber.
If TimerWarner could sell it's content ala cart and make more money than they currently do off subscriptions I'm sure they'd do it! They have wisely invested in the creation of HBO Go such that if the day comes where that's a more profitable venture, and there are no contractual roadblocks, they'll flip the switch in an instant.
Just to clarify, Time Warner Cable is no longer related in any way to Time Warner. They've licensed the name since 2009.
This clarification does not change your point, however. A conglomerated cable channel owner benefits from any one of their channels driving access to all of them. If HBO did circumvent the cable operator, they may be hurting their brothers and sisters in the process
How is it unrelated? Dish wants more money for carrying AMC. The same deal could happen here - cable companies could demand more money from HBO than they are willing to pay, exactly what cletus is referring to.
I know you were talking about a direct service but this argument affects HBO's current cable delivery model too.
I am a cable cutter. I made the decision two years ago after realising that the only shows I watched through my TWC/Tivo subscription were on HBO. I enjoyed them a lot, just not enough to justify spending $112 a month on the TV portion of the service. Worse, I only really watched HBO originals (the movie selection is slow to rotate and doesn't even begin to compare to Netflix). I'd get perhaps 40 hours a year of viewing from HBO (two originals, at most), which makes the net cost per hour viewed over $30. That's twice the rate of going to the cinema, never mind all the other stuff I could do in front of a TV with my time for far less (like gaming: $50 for 100 hours of Elder Scrolls, anyone?)
I ended up in this situation because I already had instant, on-demand, (mostly) ad-free access to an enormous range of current and classic TV through Netflix, Hulu, iTunes and miscellaneous network websites. I was deriving absolutely no utility from my cable subscription other than HBO. That suddenly made HBO seem inordinately expensive. It was a simple economic decision to ditch Tivo and TWC, buy a Mac Mini and a decent remote and stream everything. My bill went from $180 (including internet and streaming services) to $70 and the hardware paid for itself in under a year. (Were I a sports fan I'd be in a very different position, as no doubt I'd view $112 a month as worth it for access to live sports on ESPN.)
I pirate nothing. I miss out on none of these phantom 'water cooler conversations' people talk about. I learned patience. I have more money. It's been a good decision.
I said this had implications for HBO; I am sure I am not alone in my pre-cutter profile (streaming a fair bit, not watching much cable TV, enjoying some HBO originals) and I'm not the only one who's figured out that HBO-over-cable's cost per hour viewed makes it one of the most expensive forms of entertainment available. I don't believe HBO can compete under their current model in the long term.
What if some great writers from HBO left to join a new "startup" with deep pockets and willing to bet on internet only distribution. And what if they create a big-budget show that's awesome like Game of Thrones. Would you pay for that "channel"?
I dropped cable tv last year, haven't looked back!
I still pay the cable company for my data connection. They will change their business model, the only question is will they survive the changes brought on by new technology. There current business model has very little chance of working in the long term.
I've always suspected there is no à la carte cable because it is not revenue maximizing.
My argument: with bundled cable you can segment the market by selling the same product at different prices. If I offer a bundle of sports + movies for $100, I can sell to a subscriber who is willing to pay $90 for sports and $10 for movies, and also to the subscriber who is willing to pay $90 for movies and $10 for sports. I get $100 from both in this scenario.
If I wanted to sell sports à la carte and movies à la carte, both the avid watcher and the casual fan would have to pay the same price for the same content. In my simplified case above, each product would have to be priced at either $90 or $10, and I either lose the casual viewer or leave money on the table from the diehards.
If this is true, then regulation effectively decimates the profitability of content, meaning less good quality content (though you would be paying less for it). I think the best way to get à la carte is to preserve market segmentation by adopting some kind of tiered pricing structure--maybe time delayed releases, maybe different quality levels, or maybe Priceline-style auctions. But none of that may work as well as bundling.