HBO’s online pricing trap: HBO’s over-the-top broadband service looks doomed even before it starts

“HBO’s broadband service looks doomed even before it starts,” Martin Peers writes for The Information. “While HBO hasn’t disclosed details, pricing of the new broadband offering most likely won’t be less than HBO’s pay TV retail price of around $15 a month, according to a person familiar with the situation. That’s $6 more than the price of Netflix’s most popular plan and a price that will likely drastically limit demand for the new service.”

“HBO, of course, wants to avoid undercutting its pay TV version with a cheaper offering while at the same time appealing to a group of consumers it isn’t now reaching. But at $15 a month, HBO is likely to fail at both objectives,” Peers writes. “It will be too expensive for many people, many of whom are used to cheaper offerings from the likes of Netflix. A recent survey of broadband-only consumers by the Diffusion Group found that only 6% were moderately or highly likely to sign up for a broadband HBO service priced at $15, while 65% to varying degrees were unlikely to do so.”

“But as expensive as it is, the new offering won’t help HBO protect the pay TV ecosystem,” Peers writes. “Even a high priced standalone service adds to a growing array of such offerings that over time could make it easier for people to disconnect.”

Read more in the full article (subscription required) here.

MacDailyNews Take: These initial, futile attempts must fail before Apple gets it chance.

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HBO to offer standalone Internet subscriptions, no cable/satellite required, starting next year – October 15, 2014
Steve Jobs’ told biographer: ‘I finally cracked’ the secret to an easy-to-use integrated HDTV – October 21, 2011

41 Comments

      1. Time Warner Cable was spun-off in 2009. HBO, Turner Broadcasting, CNN, Warner Bros., New Line Cinema and many more are subsidiaries of Time Warner Inc.

        HBO Go has a higher amount of quality movies and more original programming compared to Netflix, but Netflix offers much more content. If Time Warner Inc. opens up their libraries like CBS is going to do then $10-$15 a month might be a win.

        1. And then you might ask yourself do Time Warner Cable and Time Warner Inc. still have strong ties and how will this relationship influence the future? Comcast provides cable, Internet services, and owns content creators like NBC, CNBC, etc. Comcast has put in a bid to purchase Time Warner Cable. If this deal goes through would Comcast essentially own or influence Time Warner Inc. and CNN? If true then this new company would have a massive amount of influence over what everybody sees, hears, touches, etc. I find it very interesting that CNN refuted the whole bendgate thing, while NBC and CNBC where like rabid dogs. And now, CNN’s brother, HBO, will soon offer a stand-alone product. Either this is all “show” for the justice department so the deal can go through or this is a power play and Time Warner Inc. is trying to cut Comcast off at the knees. I can’t wait to see the movie.

          1. Time-Warner Cable and Time-Warner share nothing but a name. They are separate companies, with separate shareholders. A TWC/Comcast merger would not include ownership or involve Time-Warner stock. They are completely separate companies.

            1. I realize they are two seperate companies. The spin-off was just five short years ago which means there still could be a number of close relationships between the two companies. Or it could be like the AOL situation where there is bad blood between Time Warner Inc. and AOL.

            2. Considering how long it took TWC customers to get access to HBO Go, I’d say the two companies aren’t that close. TWC may have been the last major cable company to sign up.

              ——RM

    1. So the author makes an assumption about pricing and everyone takes it as gospel? Even taking that assumption as truth, if I’m willing to pay $15 for HBO with a cable subscription why wouldn’t I pay $15 for it without a subscription? Give me ESPN and HBO for $15 per month each and I’m a happy camper with my antenna for local broadcasting, and my Apple TV for everything else. When I had 500 channels of satellite I still only watched 6 channels. I paid about $90 a month to watch those 6 channels. What’s not to like here?

    1. HBO is already “a la cart” on cable. You pay $15 for one channel (HBO) and get HBO Go. What is the difference if they no longer require a cable subscription?

      I would be more apt to purchase HBO as I don’t have cable. I bet that the 6% of broadband users that are likely to purchase HBO is about the same percentage of cable users that already purchase HBO.

  1. Time will tell if they get it right. There may be many fumbles along the way until Apple shows everyone how it should be done.

    Cable is a dinosaur. On day it will become extinct because it cannot adapt to a changing ecosystem.

  2. I … don’t quite see what the problem is. Yes, HBO probably should knock a few dollars off per month to price it competitively against their TV-centric model. I know I, at least, would be more interested in that.

    That said, if I’m going to be cutting cable out of my life but still want HBO (or don’t have cable to begin with), I don’t think it’s entirely off base for HBO to charge the same amount across the board because the savings come with not having cable. They’re running a business here, not a charity.

  3. If HBO is the only thing keeping someone in a cable subscription, the pricing is MUCH cheaper. I imagine there probably actually a few like that out there, but not many.

  4. I “disconnected” years ago…killing my expensive, and “Can’t find anything that I’m interested in watching” after clicking through 500 channels… Twice. I had cable, switched to satellite and got the same experience. There are things I’d like to have, and some of them are slowly becoming available. The initial announce,met from HBO gave me some hope that there might be a reasonably priced ala carte option coming. I’ll continue to hold out with Appletv, Netflix and Hulu until the cable companies go the way of telecom breakups.

  5. I’m not sure I see the issue here. Why would they? They are testing the waters here, they have no incentive or desire to piss off their distribution partners at this time. Cable companies are their bread and butter.

    There are plenty of examples of companies selling direct to consumers as well as through other outlets at the same price…Apple comes to mind.

    This whole cord cutting thing is not the utopia people think it will be and it’s highly unlikely to cost much less than current cable/satellite offerings unless you really only want a few channels. You still need a broadband connection and that usually comes from the same company as the tv so you’re going to pay them one way or another. Unless the government classifies internet access the same as phone service the cable/broadband monopolies will get their profits one way or another.

    1. I agree, it will be cheaper if you only want a few channels, which I do.

      But channel by channel competition will encourage much higher quality content, so who knows, I might happily end up paying MORE for fewer channels some day, if there provide more outstanding TV series.

    1. Except you can get Game of Thrones without paying at all.
      Until the Media Companies figure out you have to charge a reasonable amount (whatever that is) and allow a wide range of ways to access the content or people will continue to pirate your content, they are doomed.

      1. It wouldn’t matter how little they charge, people will complain.

        It doesn’t matter how good the quality, people will steal rather than pay and feel it’s justified.

  6. $4.99/month has to be the cableless tv benchmark price for streamed premium video media subscriptions. People will not pay more en masse for it to be successful. It is the equivalent of 99 cents for the original iTunes song downloads.

  7. This is a case of “be careful what you wish for”. These single channels will charge too much, cable will still be the way to go if you watch more then 6 different channels. Cable is the all you eat model, a la carte will ultimately cost more and deliver less content. I’m all for cutting chord, but what happens when they start pulling content from Hulu and Netflix, every show will become its own channel. Cable could be the networks only check to keep prices lowered.
    Just the possible downside to getting closer to true a la cart.

    1. Heck, I get about 15 channels over the air, in full HD, and I’m in the inner suburbs of a city with less than a million people. The channels I do get include stuff that airs on the regular networks like CBS, NBC, ABC, and the specialty cable channels I used to enjoy turned to crap, so I had no problem cutting cable 2 years ago.

      1. I’m in a rural area and I cut the TV cable two years ago. I get 33 channels (17 are HD). I had to put up a really big antenna but it paid for itself in a single month. Augmenting my Over-The-Air (OTA) channels with an Internet TV subscription is very attractive to me.

        1. Works great but you still need to know you local terrain. Here in my neighborhood broadcast reception is practically nonexistent. One would need to build a several hundred foot antenna to receive more than a few stations.

  8. HBO actually gets a big bonus from the cable companies. It’s actually more than the subscription of $10-$15 a month. $15 with no cable would be a steal. ESPN has the same issue. It makes a ton from the cable providers. I bet both will be $20 each. The problem is the cost of broadband, not the cost of content.

  9. Not sure I understand MDN’s Take. If you accept the obvious new paradigm that “the app is the new channel”, then in order for Apple to succeed with AppleTV (as a content streaming device, anyway), more content providers (particularly premium content providers like HBO) need to be willing and able risk their relationships with cable/sat providers and offer “over the top” programming.

    I was glad to see HBO finally make this move, and for CBS to quickly follow suit. Hoping to see the other alphabet nets, as well as Showtime, AMC, FX, and others follow their lead. This is what will break the cable/sat monopoly, offering more choice and flexibility for consumers.

    1. That’s assuming people ONLY want HBO programs.

      Netflix family plan: $11.99 with a wide range of shows
      Amazon: $99.00 a year with a wide range of shows
      Hulu $7.99 with a wide range of shows.
      …etc.

      If people want a couple of these options, another $15.00 a month is going to price their collection in cable range, and then what’s the point?

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