[opendtv] Will HBO Need a Partner to Launch Its Web-Only Service? - MarketWatch

From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
Date: Wed, 15 Oct 2014 13:21:56 -0400

http://www.marketwatch.com/story/will-hbo-need-a-partner-to-launch-its-web-only-service-2014-10-15

Will HBO Need a Partner to Launch Its Web-Only Service?

During a presentation at the Time Warner Inc. (NYSE: TWX) investor day
Wednesday morning, HBO’s CEO, Richard Plepler, said that HBO will begin selling
a digital version of its programming next year that will not require a pay-TV
subscription. Details were not on offer, but Plepler did say that it would be a
“stand-alone, over-the-top” service and that HBO would work with its “current
partners” and “explore models with new partners.”

Plepler’s statement marks a sea-change in the pay-TV business. As is the case
with any change of that magnitude, it might be easier said than done. Time
Warner, Walt Disney Co. (NYSE: DIS) and other pay-TV networks have been
well-compensated by cable and satellite operators for their original
programming. Unless Plepler can convince the likes of Comcast Corp. (NASDAQ:
CMCSA) and its presumed partner Time Warner Cable Inc. (NYSE: TWC), as well as
Charter Communications Inc. (NASDAQ: CHTR), Verizon Communications Inc. (NYSE:
VZ) and AT&amp;T Inc. (NYSE: T) and its presumed partner DirecTV (NASDAQ: DTV),
that this will not cannibalize the pay-TV business, it is difficult to imagine
how HBO can pull this off.

HBO generated nearly $5 billion in revenues in 2013 by licensing its
programming to pay-TV providers that then bundle the programming into a package
with dozens or hundreds of other channels and sell those bundles to consumers.
The cable and satellite providers have resisted breaking out the more popular
networks, like HBO and Disney’s ESPN, in what’s called an “a la carte”
offering, but that is exactly what HBO is now saying it will do on its own. The
company already offers a service for subscribers called HBO Go that allows them
to view HBO programming on other devices.

According to Plepler, there are 10 million U.S. households that pay for only
broadband access to the Internet and do not shell out for pay TV. There are 80
million households that do not subscribe to HBO. He sees this as an
opportunity: “That is a large and growing opportunity that should no longer be
left untapped. It is time to remove all barriers to those who want HBO.”

HBO could partner with one of the current over-the-top streaming services like
Netflix Inc. (NASDAQ: NFLX) or Amazon.com Inc.’s (NASDAQ: AMZN) Amazon Instant
Video. That option could keep HBO’s current cable partners in line. Even more
dangerous from the pay-TV operators’ point of view would be Apple Inc. (NASDAQ:
AAPL) or Google Inc. (NASDAQ: GOOG), both of which have very substantial war
chests, and if HBO is seeking a partner that could make up some of the revenue
that might be lost from the pay-TV providers, these two would be at the top of
any list.

Netflix shares got slaughtered following reports of HBO’s statement, down more
than 4%. The shares have come back somewhat, now trading down about 3.1% at
$435.15, in a 52-week range of $299.50 to $489.29.

Shares of Time Warner were up 1.2%, at $71.47 in a 52-week range of $58.22 to
$88.13.

Regard

Craig

[opendtv] Will HBO Need a Partner to Launch Its Web-Only Service? - MarketWatch

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