HBO has a message for the thousands of fans begging to pay for its online streaming service, HBO Go, exclusively. Thanks, but no thanks. We don't want your money. Even if you'll just pirate our expensive stuff, otherwise.
Why is HBO turning away hoards of people practically begging the company to take their money ... even more money than they currently make per subscriber right now? TV is complicated, but let's make this simple. I've got three big reasons why HBO Go won't go it alone: the price reason, the political reason, and the demographic reason.
1) The Price You're Willing to Pay Is Almost Certainly Too Low. Every month, the cable companies tally up their tall piles of ~$80 monthly cable bills and send money to each of the networks in the bundle. These fees range from a few cents per-subscriber-per-month to a few dollars. HBO currently has 30 million premium subscribers. It gets a whopping $7 every month for each one. The easy arithmetic suggests that with 15 million subscribers paying $14, HBO could get the same revenue.
Ah, same revenue, but not the same profit. Weaned off big cable, HBO's costs would skyrocket. It would have to build its own streaming infrastructure. It would have to take over its own marketing. It would have to build a customer services team and a billing team. All of these costs are currently covered by the cable companies. But if you wanted to pay for HBO Go exclusively, you would have to pay more for the unbundled content plus these new costs.
HBO leans on cable, and cable leans on HBO. Just like Disneyland would lose money if it sold a la carte
tickets to Splash Mountain for $20 without requiring $80 park admission, cable
companies would lose money if HBO went for $20, alone, without basic cable package.
So what you've got is a mutually beneficial relationship between HBO and TV on the one hand ... and consumers who are screaming for HBO Go on the other hand. But as Tim Carmody put it perfectly: "HBO is never going to dynamite its multi-decade relationship with cable
companies unless individual customers were willing to make a Godfather
2) It's All Time Warner's Fault. I'm summing up Gabriel Rossman's fantastic post here: Even if HBO could thrive with an a la carte model (and that's not obvious), its parent company would not. HBO is owned by Time Warner, whose other channels -- TBS, CNN, etc -- rely more on channel-surfing audiences, not cult
followings. (Wolf Blitzer sounds like a Game of Thrones character, but, alas, he is not, yet.) Selling HBO Go on its own would encourage cord-cutting. Cord-cutting would hurt Time Warner. And a hurt Time Warner is bad for HBO. Rossman calls this the "taking one for the team" argument.
3) TV Is Where the People Are ... For Now According to a 2011 Economist
article, there are about 105 million multichannel TV households in
America versus an estimated 3 million affluent homes with broadband but
no multichannel TV. If you're selling expensive content to audiences with screens, which audience would you focus on? Probably the one that's 30-times larger. Cord cutting is still a pretty small segment
whose over-representation in blogging-about-how-much-I-like-HBO-shows sector is somewhere near 1 million percent.
*If you're against bundling, philosophically, you shouldn't settle for freeing HBO Go from cable, because HBO itself is a bundling service. If HBO Go were priced too high, many of the people screaming for exclusive streaming today instead might scream for HBO Go to unbundle Game of Thrones and other shows and make them available on their own. It's a Russian doll set of bundling frustrations!
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