This is a guest post from FT media correspondent Kenneth Li
It has taken no less than two years of testing, but HBO Go, the subscription TV channel’s broadband portal, has finally launched in the US.
Initially available to Verizon’s estimated 3m television and high speed internet customers, the Time Warner-owned HBO plans to offer this to all 30m of its subscribers at no extra charge in a staggered rollout. HBO said it was in talks with European pay TV operators on similar versions outside the US.
Only subscribers to pay TV packages will be able to peruse the 600 hours of programming that includes the entire season of The Wire and movies currently scheduled for the service such as Watchmen. (Nearly the entire softcore porn lineup is also available including Super Ninja Bikini Babes, Voodoo Dollz, Real Sex and the popular Alien Sex Files series.) The exact same catalog of shows is available to Comcast customers, but repackaged under the cable operator’s own video portal Fancast Xfinity.
HBO Go’s launch is the strongest demonstration of Time Warner’s “TV Everywhere” initiative that aims to vastly improve the volume of videos offered online – in this case, four times as many hours of programming than cable video on demand services – but only to paying subscribers.
In keeping with TV Everywhere’s core principle to safeguard the economic cycle-resistant business model forged over three decades, Eric Kessler, HBO co-president, says the “name of the game here is customer retention”.
Big content producers like Time Warner have much to protect. HBO, which does not separately report financials, generates about $4 billion in revenues and a cash flow of $1.3 billion annually, according to Edward Jay Epstein, a media industry author writing for Gawker, and confirmed independently by a source familiar with the network.
Perhaps the bigger industry ripple won’t come until HBO and Verizon begin offering a similar service for smartphones, which Kessler said was in development. It will unlikely to play on the iPhone since the site’s videos are offered within an Adobe Flash player. A version that would let subscribers download shows and movies from HBO Go is also in the offing. Whether those downloads will make their way onto Apple’s upcoming iPad tablet computer is an open question that HBO executives dodged for now.
A flood of similar sites from other big pay TV channels are expected to make their debuts this year and if all of them followed HBO Go’s gameplan – web and smartphone access – consumers may face a difficult decision on their next smartphone purchase. The iPhone, for all its elegance and utility, may be locked out of a burgeoning source of online video entertainment, at least for pay TV subscribers.
Apple has also had little success so far in convincing television networks to license their programmes to create a low cost TV subscription plan for the iPad.
But at least one senior television executive recently told the FT that this could be the year media companies pursue subscription deals outside of traditional confines. A transaction for Comcast, the top US cable operator, to take control of NBC Universal, owner of America’s oldest television network and cable channels, faces intense regulatory review, creating an opportunity for networks to extract concessions. “The government is on our side,” the media executive said.
It is hard to shake the feeling that HBO Go is an expression of a giant’s bet on the day when web video watching makes a serious dent in TV viewing and preparation for a day when it can start charging separately for subscriptions unbundled from distribution contracts.
For now, there is no price consumers can pay (we asked) to separate cable networks like HBO from pay TV providers like Verizon or Comcast. There is simply no economic reason for HBO to do so, they say.
