HBO to Launch Stand-Alone Streaming Service

[garbon]

http://online.wsj.com/articles/hbo-to-launch-standalone-streaming-service-1413385733

HBO is finally giving the cord-cutters what they want.

Speaking at Time Warner Inc. 's investor day meeting on Wednesday, Richard Plepler, the chief executive of HBO, announced that the pay-TV channel would launch a stand-alone, online streaming version of its service next year.

The new service, an expansion of the pay-TV channel's popular HBO Go streaming platform available to pay-TV subscribers, will be primarily targeted at the 10 million people in the U.S. who don't currently have a cable or satellite-TV subscription.

"That is a large and growing opportunity that should no longer be left untapped," Mr. Plepler told investors.

Consumers have been pushing for HBO to offer its network on the Internet for years and the success of Netflix has put additional pressure on HBO to go over-the-top.

But HBO has been reluctant to pursue that strategy out of fears it would rock the boat with its traditional distributors—cable and satellite providers.

Few details about the over-the-top service were revealed, including at what price HBO will offer it. A person familiar with the plans said it wouldn't be cheaper than what it currently costs subscribers to get HBO through their multichannel video program provider.

That is crucial because if HBO were to offer its online version at a discount to what pay-TV customers pay it would likely create a backlash from cable and satellite operators, which are already worried about losing customers to broadband video services such as Netflix and Hulu.

An online-only version of the channel could translate to hundreds of millions of dollars in revenue for HBO, Mr. Plepler said.

HBO currently has about 30 million subscribers in the U.S. Mr. Plepler said not only would HBO Go target so-called cord-nevers—people who have never had a pay-TV subscription—but that it would also aggressively market its service to the more than 70 million pay-TV homes that currently aren't subscribing.

Traditionally, HBO relies heavily on distributors to market and promote HBO. Mr. Plepler indicated that many are falling down on the job.

HBO also wants to rework its partnership with distributors to increase the revenue it gets. Mr. Plepler said there are hundreds of millions of dollars its partners aren't sharing.

"We will get our taste," Mr. Plepler said, quoting a character from the network's mob hit "The Sopranos."

I guess HBO finally changed their mind on whether it would be profitable to have a streaming services.

[mongers]

Damn, I have enough difficulty keeping up with a mail-in dvd rental service, no tv and occasional bbc catch use. Again how do some of you guys manage to watch all of that stuff.

[MadImmortalMan]

It's about time. Maybe they saw some stats on how many people pirate Game of Thrones.

[garbon]

It's about time. Maybe they saw some stats on how many people pirate Game of Thrones.

Yeah I had read a blurb from them on those stats and they were like well we will do so if it makes financial sense.

[mongers]

It's about time. Maybe they saw some stats on how many people pirate Game of Thrones.

Yeah that did seem an odd way to 'contain' a runaway success.

Over here it was only available on a individually priced episode basis from one or two service; so expensive it was as cheap to just outright buy the dvd boxed sets

[Ender]

I don't know.  How many movies HBO "owns" at a given time? If it have rights for, lets say, 10,000 movies, then it might be worth the money.

I can see the potential,  but they would need to offer something similar to Netflix to be competitive.

[Martinus]

That's good. I will still subscribe to both cable and streaming HBO though.

[Josephus]

It's about time. Maybe they saw some stats on how many people pirate Game of Thrones.

For sure. But will the pirates pay for something they can get for free? I know that their "excuse" has been they didn't have cable or satellite. But now...will they pay?

[Barrister]

It's about time. Maybe they saw some stats on how many people pirate Game of Thrones.

For sure. But will the pirates pay for something they can get for free? I know that their "excuse" has been they didn't have cable or satellite. But now...will they pay?

Some will, and many won't.

[Martinus]

Not sure about the US, but here a lot of piracy is availability driven. I havent pirated a HBO show since I get them legally from HBO Go. There are other shows which I cant watch except with a 6-12 month delay and with bad Polish dubbing - I would welcome the ability to watch them immediately.

[garbon]

In related news...

http://www.buzzfeed.com/peterlauria/netflix-loses-about-7-billion-in-value-after-missing-subscri#2k46u69

Netflix Loses About $7 Billion In Value After Missing Subscriber Targets

Netflix stock plummeted by about $115 per share after reporting third quarter results that missed expectations and followed an announcement earlier in the day that HBO Go will be available to people without a pay-TV subscription starting next year.

After nearly two years of near-flawless execution, Netflix offered up a rare miss with its third quarter earnings, sending its stock down more than $115 in after-hours trading Wednesday.

The streaming video service, which had been on a subscriber addition tear since 2013, missed both its own and Wall Street's projections for new signups during the quarter. Netflix said it added just over 3 million subscribers globally during the quarter, with just under one million coming from the U.S. and just over 2 million coming internationally. The company now has 53 million total subscribers worldwide, with 37.2 million in the U.S. and 15.8 million internationally.

Netflix took full responsibility for the miss, saying that it "over forecast" subscriber additions for the quarter. The company also said that as best as it can tell the primary cause for the miss is owed to "the slightly higher prices we now have compared to a year ago." Netflix pricing varies but the basic streaming product costs $8.99 per month in most markets.

"In hindsight, the impact of higher prices [last quarter and in the early part of this one] appeared to be offset for about two months by the large positive reception to Season Two of Orange is the New Black," Netflix said in a statement. "We remain happy with the price changes and growth in revenue and will continue to improve our service, with better content, better streaming and better choosing."

Netflix shares, which ended the day down 53 cents to $448.59, fell more than $115 in after-hours trading to as low as $330.50 per share. The company's worth declined by about $7 billion as a result, to around $20 billion from $27 billion.

On its last two earnings calls, Netflix made big news by first coming out publicly against the Comcast-Time Warner Cable merger and next detailing plans for a massive international expansion of its business. But the impact of its subscriber miss was likely compounded by the fact that HBO, one of its biggest competitors, made headlines earlier Wednesday by announcing that it would make its HBO Go streaming service available to people without a pay-TV subscription beginning next year. The move puts HBO in direct competition with Netflix for the first time ever — Netflix's Ted Sarandos famously said that the company's goal was "to become HBO before HBO becomes us."

Netflix inserted a short comment into its letter to shareholders addressing the HBO GO news, saying that, "Starting back in 2011 we started saying that HBO would be our primary long-term competitor, particularly for content. The competition will drive us both to be better. It was inevitable and sensible that they would eventually offer their service as a standalone application. Many people will subscribe to both Netflix and HBO since we have different shows, so we think it is likely we both prosper as consumers move to Internet TV."

Indeed, while HBO and Netflix will be in direct competition, that doesn't necessarily mean consumers will choose one at the expense of the other. More likely is that they end up subscribing to both at the expense of a pay-TV subscription or other streaming video service.

The big advantage HBO has over Netflix is in theatrical movies, where the network has long-term licensing deals in place with three of Hollywood's biggest studios: Warner Bros., Universal Studios, and 20th Century Fox. Movies are still cited by consumers as the top reason for subscribing to HBO, with 40% doing so solely for them. Plepler said, for instance, that movies such as Reds 2, Fast and Furious 6, and We're the Millers were each watched by more than 20 million people. Fourteen of the top 25 movies released so far this year will be available exclusively on HBO, Plepler said.

For its part, Netflix has deals with Disney, The Weinstein Company and a handful of other independent studios for movies. During the third quarter Netflix also made its much anticipated move into the movie business, announcing a 4 picture deal with Adam Sandler and an agreement to co-finance the sequel to Crouching Tiger, Hidden Dragon from The Weinstein Company. Sandler's films under the deal will appear exclusively on Netflix beginning in 2016, while the Crouching Tiger sequel will appear simultaneously on Netflix and in select IMAX theaters when it premieres in August.

Netflix said it is investing in original movies because financially it is better than some pay-TV deals and because "it is consistent with the desires of the global on-demand generation to enjoy new movies without having to wait for months after they debut in U.S. theaters."

While Netflix released more new original programming during the quarter, including BoJack Horseman and the second season of Hemlock Grove, it didn't have anything approaching the popularity of House of Cards or Orange is the New Black. Its next major original series, Marco Polo, is slated to premiere in December. In addition, the company said it is in production on nine other original series and during the quarter signed a deal for a new comedy series from Judd Apatow to debut in 2016.

For the quarter, Netflix reported revenue of $1.2 billion and net income of $59 million, or 96 cents per share. It finished the quarter with $1.7 billion in cash and $8.9 billion left to pay on content, or what the company calls "content obligations."

But Netflix shares swing wildly based on its subscriber targets, and the miss coupled with the HBO Go announcement appears to have spooked investors. BTIG analyst Richard Greenfield projected in a report earlier this week, for instance, that he expects Netflix to reach 100 million subscribers worldwide by 2017.

While no other details about the planned HBO GO stand-alone service were released, including how much it would cost and what kind of content would be available on it and when, its CEO Richard Plepler said a big focus would be on marketing it to broadband-only homes in the U.S. and "millennials," basically the people who have been a huge boon to Netflix and other streaming video services by cutting the cord or bypassing pay-TV altogether.

[Liep]

It's about time. Maybe they saw some stats on how many people pirate Game of Thrones.

For sure. But will the pirates pay for something they can get for free? I know that their "excuse" has been they didn't have cable or satellite. But now...will they pay?

I saw the light when HBO opened up a streaming service for Scandinavia some years back.

[Berkut]

I think we are seeing the start of the end of cable and satellite as content delivery mechanisms.

It simple doesn't make any sense.

Some entity creates content they want to sell to consumers.

The current model of cable and/or satellite as the means of getting that content into your home makes absolutely no sense at all except as a legacy. You don't need them, nobody needs them, the internet can deliver digital media just fine.

The only reason there isn't a more integrated, rational delivery method already is because cable and satellite don't allow it. This cannot last.

Sell any stock you have in cable/satellite providers. They will go the way of Kodak.

[Eddie Teach]

The only reason there isn't a more integrated, rational delivery method already is because cable and satellite don't allow it. This cannot last.

It's not just the cable companies, the content owners don't like streaming either.

[celedhring]

The only reason there isn't a more integrated, rational delivery method already is because cable and satellite don't allow it. This cannot last.

It's not just the cable companies, the content owners don't like streaming either.

That's true, streaming monetizes poorly and stuff like Netflix cannibalizes DVD sales and even digital downloads. There's no need to own stuff when you can watch almost anything you'd want for 9 bucks a month. It's such a good deal it's a no brainer.

We are facing a similar phenomenon than the music industry faced in the 2000s; where streaming and digital formats have provoked a race to the bottom, not only because of piracy, but because those formats don't monetize as well. However they are much better products for the customer, and at the end the better product wins out. Companies can't stop it, but they will try their darndest to stall it as much as they can.