[opendtv] Forbes: Cut The Cord? HBO Considers Selling Direct To Better Combat Netflix
- From: "Manfredi, Albert E" <albert.e.manfredi@xxxxxxxxxx>
- To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
- Date: Wed, 8 Oct 2014 23:49:11 +0000
This story repeats The Guardian's article about HBO going direct to consumer,
but it adds some key points that I think Craig misses. That's why I'm posting
it (and also because it seems to take a whole lot of ammo to make a simple
point).
Here are some significant points made in the article, that somehow I feel the
need to emphasize or they will go unread:
"Bewkes was talking about moving from selling HBO through cable and satellite
companies to a direct-to-consumer model: 'The broadband-only opportunity up
until now wasn't ... at the point where it would be smart to move the focus
from one to the other.'"
Translation: we are no longer dealing with the single content source monopoly
of MVPDs today.
"What's perhaps most noteworthy is that the motivation for that analysis was
Netflix CEO Reed Hastings' comments that he saw only HBO on his competitive
radar."
So yes, Netflix does compete with HBO. And even this implication to the
contrary, below, is *not* based on the content they sell, but on the business
models they use:
"... the two companies still rarely compete directly. The reason, of course, is
that Netflix sells directly to consumers and HBO sells through cable companies
(with the exception of the Nordic countries, where it has experimented with a
direct model)."
These next two quotes are about something Craig never mentions:
"The net effect is that HBO's much larger customer base - more than 114 million
worldwide - brings in less revenue [than Netflix], because the booty is shared
with distributors."
"But it also reminds that HBO without internet is nowhere and Comcast is a
partner in many ways. Once HBO starts skirting cable, it runs two very distinct
risks. First, it will anger those partners, who like receiving about $8 per HBO
subscriber each month and also using the popular channel to encourage people to
buy bigger bundles of cable TV. Second, it has a pricing problem. If HBO
charged $10, for example, it would likely make more than it currently does per
customer. But that would surely infuriate Comcast, DirecTV and others who would
not be undercut."
Indeed. And yet, even without those old-time extras the distribution/content
monopolies enjoyed, without the likes of HBO, the ISPs would have a tough time
selling the higher speed Internet packages. So, this is called competition, in
a day when HBO and the network can no longer expect to operate in a monopoly.
"HBO has always known the day was coming when it would have to emulate its
upstart rival [Netflix], ..."
Translation: milking the old model for all it's worth.
And then, are we just talking about a couple of oddball exceptions here? Like,
most of the congloms wouldn't dream of doing any of this direct to consumer?
Hardly.
"Les Moonves, the head of CBS, was asked about taking Showtime direct and
Deadline reported him saying this: 'Everybody in the media business is thinking
about what is the most appropriate way to market your product ... Is there some
time in the future when that could happen? Absolutely. I don't know when that
is ... Over the next three to five years, the business will change
dramatically.'"
Craig keeps insisting that the congloms want to stick with "the bundle." Then
how do you parse all of these changes and impending changes, Craig?
Bert
--------------------------------------------------
http://www.forbes.com/sites/markrogowsky/2014/09/11/capocalypse-now-hbo-edges-closer-to-blowing-up-the-cable-industry-as-we-know-it/
Mark Rogowsky
Contributor
9/11/2014 @ 5:15AM
Cut The Cord? HBO Considers Selling Direct To Better Combat Netflix
"Up until now." Three little words uttered by Jeff Bewkes, the CEO of HBO's
parent company Time Warner, at a Goldman Sachs conference yesterday that could
represent a seismic shift in the way cable TV is sold. Bewkes was talking about
moving from selling HBO through cable and satellite companies to a
direct-to-consumer model: "The broadband-only opportunity up until now wasn't
... at the point where it would be smart to move the focus from one to the
other. Now the broadband opportunity is quite a bit bigger," he said, as
reported on Cnet. Bewkes didn't make any announcements, but he certainly
sounded more sanguine about the possibility than he has before. Cord cutters
have reason for hope; cable operators have much to fret about.
Turn and face the strange?
Less than a year ago in this space, I weighed the arguments for HBO going
direct:
"On balance, there comes a time when not only HBO, but other cable channels,
might well find they need to bypass the middleman. And if there was a chance
for HBO to blunt the continued growth of Netflix by making now that time, the
argument would be much more compelling. The good news for HBO is that the Go
app is already built and fantastic."
What's perhaps most noteworthy is that the motivation for that analysis was
Netflix CEO Reed Hastings' comments that he saw only HBO on his competitive
radar. Netflix has tacked on 10 million subscribers since then, bringing its
total to 50 million, and expects close to 4 million more in the upcoming
quarter. It also passed HBO in total subscription revenue last month. But for
all the talk about HBO coming from Hastings, the two companies still rarely
compete directly. The reason, of course, is that Netflix sells directly to
consumers and HBO sells through cable companies (with the exception of the
Nordic countries, where it has experimented with a direct model).
The net effect is that HBO's much larger customer base - more than 114 million
worldwide - brings in less revenue, because the booty is shared with
distributors. If HBO cuts out the middleman, it will incur all sorts of costs
it doesn't have today, but it will have a different set of problems. Billing,
marketing, customer service and content delivery are barely on HBO's plate.
They would all be front and center for an HBO Go you can buy without a cable
subscription. As a trial balloon, the company has been selling HBO with a
"skinny basic" cable plan, including broadband internet and local channels.
That service on Comcast runs about $50 a month and Bewkes has been pleased with
the uptake.
But it also reminds that HBO without internet is nowhere and Comcast is a
partner in many ways. Once HBO starts skirting cable, it runs two very distinct
risks. First, it will anger those partners, who like receiving about $8 per HBO
subscriber each month and also using the popular channel to encourage people to
buy bigger bundles of cable TV. Second, it has a pricing problem. If HBO
charged $10, for example, it would likely make more than it currently does per
customer. But that would surely infuriate Comcast, DirecTV and others who would
not be undercut. Still, if HBO opens the door, the potential exists for others
to follow. And even if only a few key channels do that, the cable bundle as we
know it begins to unravel and, at minimum, consumers gain new choices in how to
acquire programming.
Netflix doesn't have these problems, selling for as little as $8 per month with
no worries about anyone else charging a different price. HBO has always known
the day was coming when it would have to emulate its upstart rival, and it
would surely gain more customers at Netflix-like prices, but the transition
will be painful. This is why it hasn't made any moves so far.
The tide is high?
In the meantime, the shift in thinking isn't limited to HBO. Les Moonves, the
head of CBS, was asked about taking Showtime direct and Deadline reported him
saying this: "Everybody in the media business is thinking about what is the
most appropriate way to market your product ... Is there some time in the
future when that could happen? Absolutely. I don't know when that is ... Over
the next three to five years, the business will change dramatically."
Perhaps sooner. Sony finally inked a deal to carry Viacom channels like Comedy
Central and MTV on its proposed cable-like service that would run over an
existing broadband link. That service also first hit this space last year and
is one of several slimmed-down cable offerings a number of companies are trying
to make real. Getting programming rights has been the hard part, though Dish
Network is also believed to be making progress for its own variant. As with HBO
going direct, these new cable offerings have implications for the traditional
cable operators and their mostly one-size-fits-all bundles. That's why you're
seeing experiments like the Comcast-HBO-broadband offer. Expect many more new
models to emerge soon.
Last year, I wondered if for HBO's direct efforts: "Perhaps the time has come."
It hadn't yet, but it's drawing ever closer.
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