Why HBO doesn’t want you as their customer

by Staff Writer

Cord cutters, you’re called. People who have decided having both internet service and cable service is redundant. The next generation who prefers to get their entertainment at will and on demand, on any device at any time. With services like Hulu and Netfllix, you know what’s possible, and you’ll have it no other way. And despite having an online delivery service of their own called HBO GO, HBO doesn’t want you as their customer.

They even claim cord cutting is a fad brought on by the down economy…er something.

But the truth is: they’re terrified of you. And now with the massive popularity of the series Game of Thrones, and the consequential record piracy projections, the issue has gone mainstream. People are wise to the lack of choice as a consumer, and they’ve shown that they won’t be bullied into buying cable just to watch a single show. And HBO seems content to leave these potential customers on the market knowing full well the consequences of doing so. But now these forsaken customers are clambering to understand why.

Follow the money:

The reason for HBO’s stubbornness is quite simple: While serving its content directly to online consumers instead of being exclusively tied to cable service might be good for HBO, it would likely be at an overall loss for the parent company: Time Warner.

HBO is owned by and represents around 25% of Time Warner’s total value. And even though it’s a relatively lone bright spot in an otherwise (generally) struggling company, a majority of the revenue still comes from the cable and broadband internet supplier: Time Warner Cable. If HBO were to offer their content independent of cable, they believe it would actually encourage cable cutting. Suddenly, demand for cable service (their bread and butter) would be made that much weaker.

But that’s not all it would do.

If HBO makes it easier for people to get rid of cable, It would also weaken other cable content networks as overall cable subscribers drop. Having cable service as a prerequisite for HBO benefits the other channels much more than it benefits HBO. As you might know (or have guessed by now) Time Warner owns a number of these properties as well: Turner Broadcasting (TNT, TBS, TCM, CNN, Cartoon Network, TruTV, etc.) and Warner Brothers (WB, CW, etc.) to name the bigger ones.

This is also why Time Warner sees services like HULU and Netflix as more direct competition than services like Comcast or Direct TV. Growth of the former only serves to weaken the demand for expensive cable packages (that usually include a large number of unnecessary channels you might not have any interest in at all…but you pay for); the latter still strengthen it even though they compete directly for the same customers as service providers. And that means more lucrative licensing contracts as well as ratings and advertising revenue for a majority of their cable networks.

Why Game of Thrones may not be a good litmus test

The popularity of the show Game of Thrones is not to be underestimated. It’s one of the hottest shows on TV right now, beating out Mad Men in the ratings making it #1 for the highly contested Sunday 9:00 P.M. EST time slot. Add that to the fact that it’s is the most illegally downloaded show in history, and you have a show that has quite a sizeable audience.

Lately, there’s been a lot of those who will look at the piracy numbers and point fingers at HBO for having a lack of foresight. But honestly, if you didn’t see it coming, you don’t deserve to work in TV, let alone for HBO.

Game of Thrones is an adaptation of the fantasy book series A Song of Ice and Fire. It’s a show that caters to a built in audience that is…let’s call them: tech savvy. They also probably aren’t (generally) quite as interested in sports and likely don’t watch all that much Television regularly. In other words, ironically, HBO’s most popular show caters to an audience of classic cord cutters. More than most shows do, anyways.

HBO knows this. That’s why they aren’t going to be too affected by the media hype around the piracy figures. They don’t see it as a fair representation of the potential market for selling content to cord cutters. In other words, this is as good as it gets. And it isn’t enough for them to risk Time Warner’s core business model. Meanwhile, the show still does very well regardless.

Side note: I am a huge fan of the book series and purchased HBO only for the 10 weeks the season is on just so I could support the show and it would continue to get funding. I feared piracy might hurt ratings to the point that the show would be canceled. Glad I was wrong…so far.

Something’s gotta give

When HBO executives asserts that cord cutting is a fad or a temporary trend brought on by a struggling economy, they aren’t being genuine. It’s a growing reality that HBO/Time Warner will likely have to face sooner or later. Their outdated business model is fading and continues to be weakened by every new internet based content delivery service that gets added. So you can’t blame them for not wanting to contribute to their own demise. That’s why, for now, HBO GO will remain tied to cable.

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