Brilliant idea: Take My Money HBO — and very popular. But the nay sayers are coming out of the woodwork. There are a number of finance and infrastructure counterarguments, from HBO’s perspective. Ryan Lawler, on techcrunch, argues that the numbers no longer add up when you take the marketing and distribution into account, services currently off the books in the cable arrangement. Put those costs onto HBOs books, and the economics of online distribution no longer work out.
This based on a faulty assumption, namely: “Going direct to online customers by pitching HBO GO over-the-top would mean losing the support of its cable, satellite, and IPTV distributors.”
Lawler states this, but offers no support. There are any number of mechanisms for preventing this loss of support, or transitioning it. (Best I’ve seen so far: start at a high price point to limit cannibalization, and pump some of the proceeds back to the cable system. Another: pull a hulu and limit access to current shows, require the full cable subscription to get access to back inventory.)
Moreover, Lawler completely ignores the potential upside for HBO of slipping out of the cable noose. Cable limits the potential viewership both regionally and economically. Imagine an immediate global audience for an established product that has heretofore been restricted to a very small demographic slice. There are few companies that would walk away from that without giving it serious consideration.
So, let’s be honest: what’s really going on here is that HBO is owned by the cable company itself. Time Warner is calling the shots and acting not in HBO’s best interests or the viewer’s best interests. They are acting in the cable company’s best interests.
Most people think of cable companies as a necessary evil. With the advent of cloud based media (Netflix, Amazon, etc.), Cable companies are losing their grip on “necessary”.
My advice to Time Warner would be: you’re already losing your monopoly, so why not reposition and rebrand in a way that convincingly rejects the evil?
In conclusion, the biggest argument Lawler misses is the simple good will that HBO currently has by virtue of producing consistently excellent programming. Rather than abuse that good will to bolster a dying business model, why not leverage it to invent a new one?