A Look at Time Warner's HBO Conundrum

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Nov. 8 (Bloomberg) -- RBC Capital Markets Analyst David Bank discusses cable versus streaming media on Bloomberg Television's "Market Makers." (Source: Bloomberg)

Time warner.

What do you think of this?

People want hbo go on their ipads.

The next generation -- i talked to our 25-year-old producers who say my cable box?

What do you use dial-up on your internet?

They laugh at me.

You have asked the right sample set for whether or not there is a demand for the product.

It is not indicative of the consequences of the product.

The product -- the comcast internet lust -- plus product allows you to buy a light package along with broadband and hbo.

The reason that the media emphasis has worked so much over the last couple of years and generated such i returns is that all of the digital opportunities have been incremental.

They haven't cannibalized any of the core opportunities.

The key here is what hbo is trying to do.

I think they are trying to get the core members.

They are trying to get your 25- year-old producer who thinks we are using dial-up modems.

Thinks i have bunny ear antennas.

Maybe she doesn't have a cable subscription.

I think she will get one eventually.

For now, there is a subset of people who are called cord- nevers.

If we can get them to be incremental hbo subscribers without turning off court television -- court television, it is a really great opportunity.

But that is asking them to pay more for some basic cable subscription with hbo attached then they would have to pay if it were just hbo.

Unfortunately, that is true.

Hbo alone is not yet an opportunity.

How much would that cost?

Great question.

I don't really know that you could charge a whole lot more than your charging today.

I would think something like $10 a month or $12 a month.

Given the relative price point of netflix, they will probably be stuck somewhere in that range.

The cable companies use it to upsell their expanded digital products.

Hang on a second.

Let's play a thought experiment.

Let's say you could buy hbo go for $10 a month or $12 a month.

Hbo is pretty awesome.

Netflix gives you a lot more than hbo go does for that amount of money.

But as far as new content, you are getting more and hbo then you are getting a netflix.

How many hbo original series can you name?

I am in love with "hello, ladies." current series.

There are not that many that are current.

"game of thrones" is probably the biggest one.

If time warner were to do that, would it would would be worth $20 billion?

That's a great question.

I think it is a -- at the expense of the rest of the bundle, it is not worth answering because affected by hbo alone and it was so valuable and the and tire universe decided to buy it as a replacement for netflix, and ultimately you would potentially turn off your cable subscription and there is too much to lose in the rest of the bundle.

I'm avoiding the question a little bit.

Time warner has hitched its wagon to this horse called cable.

The truth of the matter is that without cable, these time warner properties are not worth very much.

Without cable -- yes.

That couldn't survive this over the top business on their own.

You meet separately.


It is like a technology question.

Ultimately, we will probably have a broadband delivered cable company.

They don't survive without the bundle.

That i would agree with.

The bundle.

The whole business gets disrupted without it.

Without the bundle everything would be good.

Do you ever wonder about some of those networks that would only survive with a bundle?

What is and time warner look at them and say, guess what, if any the bundle we should cut them off.

You know i love my syndicated tnt "law and order" reruns.

Not at all.

We have commissioned our own proprietary surveys on this topic.

You know what people generally want to spend in an ideal world?

They want to spend about $40 per month for something like 20 channels.

If you could do the chinese menu and do it all a card yourself.

That is the solution people want.

For another $10 or $20 and another 150 channels and another massive amount of content investment, don't you think that on the margins that's why would you give that up?

120 channels that i don't give a hoot about.

They cost you really nothing and you watch more of them than you think.

50% of the viewership that occurs on cable is happening on the, oh i was flipping by this channel and i watched it for 15 minutes.

He would be amazed to mature watching.

Although i do watch a lot of "law and order". me to.

This text has been automatically generated. It may not be 100% accurate.


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