This was a good write-up of an interview with the HBO co-CEO: http://dcurt.is/hbo-forbes-journalism
Worth reading before spouting the typical "I don't understand why HBO doesn't want my $5 a month."
Worth reading before spouting the typical "I don't understand why HBO doesn't want my $5 a month."
What I took away from it is this: A lot of our paying subscribers don't actually watch HBO, and we don't want to compete against the sources that deliver those subscribers to us.
(Every single discussion about this should always include a mention that Time Warner owns HBO, saves a lot of mental hamster wheeling.)
They forced a bad deal on competing networks via those networks' own customers. The prize was capturing margin and exporting cost of business.
The language about controlling the examples that consumers use as a frame of reference is telling. This is a business that has mastered the game of baiting 1st parties against 2nd parties while negotiating price as a 3rd party.
I would guess there's a lot of businesses that make money by charging people for things that they don't use.
Case in point , services that allow you to subscribe online but can only be canceled by telephone. Making a telephone call is not exactly difficult , but there must be a significant quantity of people who can't be bothered to do it in order to make it worth their while implementing that policy to begin with.
And then you don't watch HBO (or at least not as often as warrants the money you spent on it). It's like all those 'options' you get when buying a car (Only $200 for floormats? that sounds like a deal!). I think it's called the bundling effect or something similar.
Edit: This is a summary of one of HBO's arguments. The dcurtis post examines a couple of other arguments. Positioning is an interesting one: How does HBO convince viewers that $5/mo is reasonable for just a few shows when Netflix is $8/mo for far more content? There are some really tough issues here.
How much revenue does HBO get from that marketing?
Also.. their largest carriers also serve a lot of cable internet, for most it wouldn't be adding a competition so much as adding another way to get at subscribers money. I'm not so sure they would be in a huge rush to drop them.
The status quo is that the typical HBO sub has a cable bill over $150/mo, because he already has broadband. Helping that subscriber cut the cord and go Internet-only (while unbundling HBO) will therefore result in a lower cable bill for the subscriber. A portion of the money the subscriber saves comes out of the carrier's pocket. This is the classic trading of analog dollars for digital pennies, and carriers will resist it as long as they are able (in the absence of a new big revenue source).
Regarding positioning: HBO is very good at producing content, but so are a lot of the organizations that provide content to Netflix (e.g. CBS, NBC, TNT, Showtime, Disney, etc.) $8 gets you access to all of those vs. a hypothetical $5 to get the output of a single studio. It's going to be very hard for HBO to hold the line on pricing in that environment.