Staying together, going it alone.

HBO Courts the Cord Cutters

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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I’ve been in Chicago almost a month now, and so far, I still do not have cable. The apartment building where I’m staying has a contract with some third-party provider that in turn contracts with DirecTV, and while the people at DirecTV have been very nice, the people at the third-party provider have an uncanny habit of making appointments and then phoning to say that they’ve fixed the problem without, y’know, fixing it -- or, in several cases, without even entering the apartment.

Ten years ago, I’d have been livid. Now I barely miss cable. I’ve got a Chromecast and a home cable subscription, which means I have Netflix, Amazon and a host of streaming options from the networks we subscribe to. Really, the only reason to use the satellite at all right now is so I can watch HGTV, C-SPAN and cable news.

In the future, it looks like I may not even need the cable subscription. HBO and parent company Time Warner have just announced that they expect to offer stand-alone HBO subscriptions by 2015. It isn’t precisely surprising that this has happened, but it is surprising that it has happened quite so soon. Time Warner still makes an enormous amount of money off cable subscriptions, and it’s surprising that it is willing to be a first mover in a strategy that may end up killing that global goose. One assumes that, as Gabriel Rossman predicted a few years back, it has decided it’s coming, like it or not, and it had better be on the bleeding edge of the transition. And also that it has enough market power to stand against the inevitable protests, and/or strategic countermoves, by the cable companies that carry HBO.

Netflix stock was -- unsurprisingly -- down on this news. As cable channels push into stand-alone subscriptions, there may be less demand for what Netflix offers. And all the streaming outlets may find it harder to get premium content, if that puts them directly in competition with the cable channels’ own streaming programs.

Which raises an interesting question: How much will this actually benefit cord cutters in the end? At first blush, the answer is “a lot” -- they can get HBO without paying for ESPN! Over the long term, however, as this becomes a bigger revenue source, I’d expect to see the cable networks stop selling their content to other streaming services, crack down on login sharing, and otherwise make sure that if you personally are not paying the cable company, then you personally will pay HBO, not your old roommate who forgot to change his password. I’d also expect to see them offer significant bonuses for longer-term contracts to discourage viewers from signing up, binging for a month or two, then moving onto some other network like harvesting crews moving north.

Which is still fine if HBO shows are the only ones you want to watch. But this year, the Official Blog Spouse and I have, between the two of us, followed programs on HBO, Showtime, Cinemax, FX, AMC, network television and probably a few others that I’m forgetting. If each of those networks charges us, say, $10 or $20 a month to subscribe, how long before we’re paying nearly as much for content as we were before ... except without getting HGTV or the cable news channels? And we don’t really watch sports, which are the most expensive part of a cable package.

Of course, I don’t know that that’s how it will turn out -- perhaps the need to compete with piracy will keep costs down. Maybe channels will aggregate into networks that provide more content at more reasonable prices. Maybe they will continue to allow promiscuous login sharing. What I do think is that the market will continue to evolve -- it won’t be “Everything just like it is now, except you can get a stand-alone HBO subscription!”

But it’s worth remembering that consumers don’t actually like unbundling very much. A television network is, after all, just a bundle of shows, and most people would rather have a subscription to HBO than buy the DVD sets or stream episodes one at a time. Monthly mobile-phone plans are still much more popular than prepaid, by-the-minute options. All-inclusive vacations and cruises remain a popular vacation choice. People like having a smorgasbord of choices they can make without having to think about the individual choices.

What most people actually want is not for cable content to be unbundled; what they want is for it to be much cheaper, or to fund more of the shows they like and fewer of the stupid shows those other people watch. These issues are frequently conflated into the cause of “unbundling cable,” but the one does not guarantee the other. It may even guarantee the opposite.

If the other networks we like follow suit, then I’m sure the McSuderman household will investigate dropping our cable subscription. But I’m not sure that we’ll end up deciding that stand-alone streaming is a better deal.

  1. I assume that the stand-alone offering will cost more than, say, adding HBO to your cable package, because now HBO, instead of the cable company, has to handle all the hassles of selling, billing and providing technical support.

  2. Prepaid plans are, to be sure, growing in popularity -- but it’s not clear that this is a change in consumer preferences or is simply what people with poor credit are driven to.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Megan McArdle at

To contact the editor on this story:
Brooke Sample at