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David Zax

A View from David Zax

HBO GO-It-Alone?

HBO mulls breaking apart from the bundle. Will its broadband partners acquiesce?

  • March 22, 2013

Earlier this week, I mentioned what Aereo’s CEO had told me would be a metric for progress in TV innovation: à la carte pricing for individual networks, rather than a compulsory bundle of countless channels we don’t watch. Many people had their eyes on HBO, the strongest brand in cable right now, as the maverick that might make a move towards separating its content from cable subscriptions. After all, it was making just this happen in Scandinavia, going directly head-to-head with the likes of Netflix there.

But tech pundits lamented the unlikelihood of the same thing happening here. HBO simply makes too much money off its current relationships with American cable providers. Good luck convincing HBO to peel away from them, alienating their sources of billions in revenue.

And yet Reuters reports that HBO is considering a clever middle-ground. The same broadband partners that deliver cable TV subscriptions are the ones that deliver Internet service–which is the medium over which HBO GO, HBO’s online streaming library, is delivered. Why not decouple HBO GO from the cable TV package–while still coupling it with broadband partners, through an Internet package?

Says Reuters:

“[HBO chief] Plepler said late Wednesday that HBO GO could be packaged with a monthly Internet service, in partnership with broadband providers, reducing the cost. Customers could pay $50 a month for their broadband Internet and an extra $10 or $15 for HBO to be packaged in with that service, for a total of $60 or $65 per month.”

Plepler added that “We would have to make the math work.”

I personally am someone who would jump on this option right away. I have come out as a cord-cutter in these pages; the glut of cable channels holds no interest for me, especially given that I do most of my viewing on my MacBook Air or iPad. The vast majority of shows I watch are on network TV or HBO. For the occasional AMC or Showtime show I feel a need to watch, I wait for a Netflix appearance or pony up for a season on iTunes or Amazon. I use my parents’ login information for HBO GO, which I would feel more queasy about if the network itself hadn’t tacitly condoned the practice in a recent Times story. I’d gladly pay a $10 add-on to extricate myself from any ethical murk and to merely support what I feel could be the vanguard of TV distribution.

Can that math work? That’s the big question. Of course, the move Plepler is mulling is brilliant in that it keeps HBO in business with its longstanding distribution and promotion partners. The real groups that should feel threatened by this potential move are the rival cable networks that are often bundled together with HBO in packages, drafting in HBO’s wake. If I’m the CEO of Showtime, I’m standing at attention right now, because I may have to be developing my own web service (something it’s dabbling in) and a strong enough library to convince slews of broadband subscribers to pony up for my service, too. Same goes for all the other cable networks who may someday have to individually compete in a way they hadn’t before. It’s analogous to the conundrum The Atlantic and The New Republic face with magazine readers: “I can barely get through The New Yorker each week, so why subscribe to another…?”

But the domino effect of an HBO GO-It-Alone scenario could–potentially–also hurt broadband partners’ bottom lines, despite HBO’s efforts to keep them happy. That’s presumably some of the math that needs to work out. The math presumably looks good on HBO’s end. But if broadband providers find that an à la carte world would result in less revenue for them than a bundled world–which stands to reason, since the main idea behind à la carte is giving consumers the freedom to purchase what they want, and no more–then is this a vision these partners of HBO will really acquiesce to? I can’t imagine this happening without broadband providers putting up some kind of fight.

Analysts on all sides will be crunching equations far beyond my ken. But suffice it to say that HBO’s vision is bold and potentially disruptive, and makes me reassess my recent despair that the television would not be revolutionized.

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