How HBO's New Streaming Service Shakes Up the Cable-TV Business

HBO's mega-hit Game of Thrones Photograph by HBO via Everett Collection

HBO will offer a stand-alone streaming service to customers in the U.S. next year, removing a big brick from the shaky foundations of the cable-TV industry. ”It’s time to remove all barriers to those who want HBO,” said HBO Chief Executive Richard Plepler at Time Warner’s investor meeting on Wednesday, Oct. 15.

Specifics are practically nonexistent. Plepler didn’t say how much such a service would cost, whether it would include a full slate of content, or even how people would buy it. A spokesman for HBO declined to give any additional details. But his remarks should be enough to strike fear into the likes of Comcast and Cablevision, whose business models are based on maintaining barriers to highly coveted cable programming.

The biggest open questions are about how HBO pursues a more direct relationship with customers than it has had in the past. The cable network has hinted it would work with broadband providers to make it possible for subscribers to pay an additional fee to get the streaming service, even if they don’t pay for cable TV. Internet-service providers (which are often the same as cable-TV providers) want to stay in the loop, and maintaining good relations with them is still important for HBO. Selling a new streaming product this way would probably help appease them. And it would also save HBO from having to build its own infrastructure for billing and customers relations—although everyone is still going to blame HBO when the service goes down during Game of Thrones.

But HBO could decide it wants to deal directly with customers. Simply opening up its HBO Go website to anyone with a credit card would be the most straightforward thing to do from the customer’s perspective. It would also benefit HBO, which right now gets some information about what’s being watched but has no access to the valuable demographic data that drive decisions at Netflix and other players in the streaming-video industry.

While this seems like a pure win for people who want to live without cable, there are clear limitations for cord-cutters. So far HBO has taken a liberal approach to people sharing accounts on its streaming website, which is supposed to be available only to HBO’s cable subscribers. Once it starts offering a paid streaming service, however, the company could decide that the free ride for password sharers is over. There are simple steps HBO could quickly take to make the practice much more difficult, such as banning simultaneous users on a single account and tracking log-in locations to identify suspicious activity.

The other big shortcoming for viewers has more to do with the National Basketball Association than with HBO itself. The league recently renewed its national television deals with Turner Broadcasting and Disney. The deals included a vague promise to explore a streaming subscription with ESPN, but the main thrust is that the NBA is buying into the current (read: cable-TV) format of televised sports for nine more years. All the other major sports leagues have television deals in place until at least 2021.

Cable subscriptions in the U.S. fell for the first time ever last year, and HBO’s new service will only accelerate that trend. For some people, of course, accessing live sports simply won’t matter. But with HBO’s move, sport fans are going to be even more vital to holding together the pay-TV model than they are now. Time will tell if the cable masses continue to pay up as long as Monday Night Football remains a strictly nonstreaming event.

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