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HBO GO: Forced to Rethink Delivery Method

The granddaddy of Pay TV programmers continues to create ground-breaking content especially with its new series “Veep”. The edgy new sitcom produces uninterrupted and raunchy situations for a fictional Vice President who cannot get out of her own way, making it hilarious and award-winning. Yet, HBO GO is tied to Cable TV/Satellite economics by an umbilical cord that will be hard to break. Currently, you must have an existing cable or satellite monthly subscription to view HBO GO on any other medium, including broadband, connected device, iPad, iPhone, Roku, or Xbox 360. If so, all of HBO’s programming is available via its HBO GO streaming video platform through Cable/Satellite Industry Apps.

Purely Economics

A fact underlying HBO GO’s delivery system is the business model that made it a household name, the cable industry. Without the enormous viewer pipeline that cable, and satellite TV delivery systems currently offer, HBO would be hard-press to generate the revenues and advertising dollars from a 20 million subscriber base, which enables it create the edgy and award-winning content, making it the #1 Pay TV Programmer. With that economic juggernaut those wishing to see a stand-alone HBO service delivered over the Internet are highly unlikely, at least in the short term. A recent survey by TechCrunch indicated that consumers would pay about $12.00 per month for an HBO GO standalone service.

Music Industry Eventually Succumbed to Hackers

We are well aware what happened to the music industry as a result of market forces that turned the music industry upside down. Since music DVD’s were about $15.00 a pop, hackers began a campaign to illegally share music over the Internet, eventually forcing the Music Industry to sell its content for $1.00 a pop via iTunes. It was unprecedented but broke a strangle hold on music pricing. The same scenario is appearing with HBO’s “Game of Thrones”, which is the most hacked program of the season, appealing to a younger audience familiar with the ins and outs of illegally sharing content via the Internet, following their predecessors of music fanaticism.

Generational Change Fueling Demand

The delivery of video is changing and more rapidly than most would have you think. As demand grows for content delivered by OTT (Over-The-Top) models continues to grow, especially with a generation which grew up on the Internet, market dynamics will be forced to adjust accordingly. That means, paying $100.00 per month for a video package via traditional delivery methods will be replaced by smaller and more price sensitive stand-alone services. Both Cable and Satellite industry executives should be heeding the hackers of the world. Change your pricing structure, or we will change it for you.

Current Pricing Models Jeopardize Future Economics

Subscribing to HBO via current Cable/Satellite delivered models is expensive. To get the full benefits of an HBO GO, customers must subscribe to a bundle for about $200.00 per month. That includes broadband, IP Phone, Digital Video Package, with related DVR subscriptions for multi-room consumption. Yes, a discount is available for a limited time, but then after the hook is in, subscribers are paying a car-note equivalent for their service. That model is not sustainable for the masses, and with current economic and job loss lethargy continuing, the model becomes more precarious to maintain. Gabriel Rossman puts the economics of content delivery eloquently by highlighting the current economics of an HBO GO standalone service.

Rethinking Delivery Method

With content delivery being the wheel that drives the economics, it must be redesigned to fit a changing consumer, one that is savvy and innovative enough to create disruptive technologies where pricing models are a victim of an inevitable paradigm shift. Truly customer convenience is the key to the wheel’s redesign; it has to be both economical and easy to access. How soon will content delivery and pricing change be both acceptable and disruptive to current pricing bundles? HBO is being forced to rethink its current method, which will happen sooner rather than later, maybe within one to two years.

By Leonard Grace, Founder & Editor - Broadband Convergent

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