Sorry Cheapskates, But HBO Doesn’t Want Your Money

Most people don't care enough, but if it's that big of a deal for you, go to a different restaurant. There's your choice.

If watching HBO is more important than having an internet only option, then pay for HBO. Otherwise ditch HBO and go internet only through Netflix or something.

Having choice doesn't mean you get to decide what all the options are.

Dan's argument isn't that this is the "best" decision in a general sense, but attempts to point out the rationale behind HBO's firm stance against uncoupling HBO subscriptions from cable subscriptions.

There is one statement in this article that really explains the whole thing. At least to me:

> And its $1.2 billion in Q1 operating income represented 89% of Time Warner’s total.

[record scratch]

In order for HBO to walk away from what works, one would have to present a very, very compelling model for what will work in the future. I don't see anyone doing that.

And is currently at war with DishTV. It's a matter if the cord cutters can replace the revenue lost from traditional markets if the cable/satellite provides go nuclear.

HBO is building a robust streaming media platform. Everything about the system would work as a standalone service, save one component: authentication and authorization.

Stop and look at the moving parts for a moment. HBO isn't letting cable providers deliver HBO content through cableco apps. HBO has their own dedicated service and applications. When I want to view HBO content, the experience is HBO from beginning to end; save the login page to my content provider. The cable company's role feels a lot like an OAuth provider.

HBO is in the content business, and they know it. I wish I could find it, but I recently read an interview with an HBO executive where he very eloquently expressed the current HBO business model. Essentially, cable companies serve as channel sales agents for HBO content. HBO knows that consumers want their content, but opening a direct channel risks their current (and very profitable) channel.

Now take another step back. If the cable companies are merely a sales channel for HBO, what does that say about HBO's long term positioning. Keep in mind that HBO is doing a great job keeping the cable providers in that role, even from a technology standpoint. I think that HBO is putting themselves in a position to jump from one sales channel to another as soon as those channels are capable of supporting their business, or at least capable of mitigating the significant risk posed by alienating the channel that currently delivers 89% of their operating revenue.

EDIT: Here is the article I was recalling: http://dcurt.is/hbo-forbes-journalism. And a relevant excerpt.

> What you don't want to do is to pursue a distribution channel over here [ed: the internet], where you think, well, let's go around the affiliate and we'll get a couple hundred thousand subs. But the promotional, and packaging support we get over here [ed: the affiliate networks], which, by the way, is the foundation of our 30 million subs and enables us to get 10 million transactions, if that dissipates, and that shrinks, then we will lose a lot of subs over here. Because with 10 million transactions, you have to generate a lot of subs every single day. You can't afford to have that machinery slow down. So we'll gain a little over here, and we'll lose a lot over here, and we think there will not be a net gain, there would be a net loss. So it's really about economics and a business issue.

Meanwhile, HBO puts themselves in a position to leap when the economics are right. Very savvy, IMO.