After Previously Claiming the Economics Would Never Work, HBO Streaming Now A Major Windfall

Culture

from the evolution-doesn't-care-that-you're-afraid dept

Wed, Aug 30th 2017 6:36am — Karl Bode

For years, HBO and owner Time Warner fell into the trap of telling customers what they wanted instead of the other way around. You might recall that HBO and Time Warner spent years waging a rather scorched earth assault on piracy and other "unauthorized viewing," going so far as to poison show torrents and shut down "Game of Thrones" viewing parties. A major problem with this approach is that HBO wasn't fully providing pirates an alternative. While HBO was offering streaming to existing cable customers, it spent years ignoring consumer calls for a standalone streaming video platform that didn't require cable.

There were any number of reasons for this myopia, the biggest being that like any good legacy company, HBO and Time Warner execs were afraid of wounding the traditional cable cash cow (even if said cow was already showing signs of notable mortality at the time). More specifically, HBO was afraid of hurting the cozy, heavily-subsidized relationship HBO enjoys with many cable providers, who all but give the channel away on occasional promotion. So while offering a standalone streaming platform was essential in evolutionary context, HBO consistently insisted it just couldn't make the economics work for such an option.

So while Time Warner and HBO execs were busy trying to downplay cord cutting as a fad, the piracy of HBO programs continued to smash BitTorrent swarm and other piracy records. That was until March of 2015 when HBO was forced to finally acknowledge the changing tides and launched HBO Now, its standalone streaming app. Fast-forward a little more than two years, and that decision is looking pretty good now in hindsight:

The “Game of Thrones” effect is in full force for HBO NOW, the premium network’s streaming service for cord cutters. According to new data from app market data provider App Annie, the iOS and Android versions of the HBO NOW mobile app have together generated $19 million in U.S. revenue for the two months containing the airing of “Game of Thrones” Season 7, as of Monday, August 21.

App Annie says it expects HBO NOW’s mobile apps to pull in well over $20 million by the end of the month.

The show’s outsized popularity has again sent the HBO NOW app flying up the Top Revenue charts on the iOS App Store, too. Roughly one month after the Season 7 premiere, HBO NOW became the number one app in terms of Overall iPhone revenue. It grabbed that spot on August 16th, 2017, and remained the top app by revenue for two more days.

That's pretty good for a service executives had to be dragged kicking and screaming toward, though you'd wonder how much more successful the platform could have been with an earlier start. And while "Game of Thrones" piracy is still booming, and HBO is still sending nastygrams to user ISPs in the hopes of thwarting it, at least HBO is now offering these users a legitimate alternative. An alternative that could provide more value over time if HBO experiments with price, or works on partnerships with smaller ISPs that have been contemplating getting out of traditional cable TV because they lack the leverage to compete with industry giants.

It's a similar predicament that's now facing ESPN, which, like HBO, spent years believing it could stand in the wings nursing its cash cow with a dumb look on its face while the entire pay TV ecosystem shifted under its feet. With cord cutting, phase one usually involves denying that the trend is happening, followed by acknowledging the trend but insisting it's some kind of fad. That's usually followed by the pretense that you saw and prepared for the trend all along despite all the data showing the opposite. It's usually good to throw in some make believe about how you're the one that gets to decide when to adapt for good measure

There's no doubt that adaptation will make these companies less money over the short term, but executives often struggle to realize a core truth: they don't have a choice. Cord cutting and the shift to IP video is happening whether these executives like it or not, and they can choose to stand mid-river in futile opposition to the flow, or adapt and take an early hit as the legacy cash cow dies, but be much better positioned for the future, whatever consumers determine they want it to look like.

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Filed Under: game of throwns, hbo, hbo now, streaming
Companies: hbo, time warner

42 Comments

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theOtherDude, 30 Aug 2017 @ 6:52am

cutting
there were only two reasons I paid for cable for years and years, HBO and Formula One. Thanks to HBONOW and Playstation TV(for NBCSports), I cut the cord a year or so ago and really never looked back.
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Anonymous Coward, 30 Aug 2017 @ 7:20am

You don't kill a cashcow. You milk it as long as you can and let other people waste ressources on innovation. As soon as a thechnology could threaten your cashcow, you buy it! That is classic Wall Street knowledge buy or get bought!

Unfortunately for the cable companies Netflix took off before they saw it and bought it.

An interesting fact about the greener technologies is that they were gathering momentum in stages, starting with being fringe, creating an image (including politically) and it is only now, when going greener is an economic advantage, it really has taken off. You should not waste oil on energy production, as it is inefficient relative to the alternatives, but like coal, oil still has enough uses in the foreseeable future to sustain on lower production. How you make "oil" and "coal" is a far bigger problem. That is also why Exonmobile is already among the most stacked on knowledge of algae oil and several other green technologies.
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crade (profile), 30 Aug 2017 @ 7:28am

Surprise surprise.. Saw the article, wanted to buy, not allowed to because of some bullshit non reason.
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Dale, 30 Aug 2017 @ 7:32am

"...at least HBO is now offering these users a legitimate alternative"

In the. U.S. only. It's like they don't know that the rest of the world exists, except that there's nasty pirates out there past the end of the water....
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crade (profile), 30 Aug 2017 @ 7:32am

Re:
You can't buy a "technology". If they bought Netflix earlier and killed it, netflix2 would pop up shortly after, then 3 and 4.. The buggy whip manufacturers might have been able to buy and shutter Ford or GM, but they can't stop the fact that cars have been invented and buggy whips are just not that useful anymore. Adapt or die.
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SirWired, 30 Aug 2017 @ 7:37am

And how do you know it's a "windfall"?
Yes, HBO now gets revenue from streaming. Yay.

But you seem to be forgetting that HBO didn't refuse to offer it before out of whim. Having cable/satellite be the sole distribution mechanism before had real value, one that we could guess was reflected in better terms for HBO.

By cutting that exclusivity, we can guess that HBO is taking a hit elsewhere, either through lower rates they can charge cable companies, reduced co-marketing agreements, etc.

In the end, the net is likely positive for HBO (or they would not have introduced the service), but it's hardly a pile of free money.
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Ninja (profile), 30 Aug 2017 @ 7:42am

I'd go further and say that HBG could strike deals with other streaming platforms as well. I'd just say fuck you to managing the infra-structure needed to serve millions and strike partnerships with several streaming services. They could ask for added $ to have access to HBO content. You know, tiered services for sports, HBO, whoever. Even if the ending price is a bit higher it would still be valuable compared to traditional cable. But at the very least they got their streaming option up and running.
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TheResidentSkeptic (profile), 30 Aug 2017 @ 7:52am

Never learn from History
IIRC, the same was claimed about VHS. Never going to work, will kill movies/theater revenue - and turned out to be a major source of follow-on revenue for both movies and old TV shows...
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The Wanderer (profile), 30 Aug 2017 @ 8:38am

Re: Re:
The suggestion is not "buy Netflix and shut it down", but "buy Netflix and let it operate, so that the money it makes goes into your own coffers".

Of course, given the desire to avoid eating into the market share of your existing offerings, whether a Netflix which went that route would still do the things which have led it to be as successful as we have seen is another question.
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Mason Wheeler (profile), 30 Aug 2017 @ 8:43am

Would you stream to set-top box? Would you stream ABC or Fox? Would you stream into my house, where I can start streams with my mouse? Would you please stream Game of Thrones? "No!" replied the marketing drones!

I do not like that stream flim-flam, I do not like it, Web-I-Am! I will not stream to set-top box, I will not stream ABC or Fox! I will not stream into your house, where you can start streams with your mouse! It'd put our finances in a jam, I will not stream it, Web-I-Am!

You do not like it, so you say, but try it, try it and you may.

Web, if you will leave me be, I'll stream something, and you'll see. I'll run it past the marketing drones, we'll try streaming Game of Thrones.

...

How can this be? Accountants say, there's tons of money coming our way. It's popular, and you know what? Even once Apple takes their cut, we're making twenty million more on streaming than we made before. I guess I like this stream flim-flam, I do, I like it, Web-I-Am!

But as we are still HBO, alternative streams have to go. Hey, lawyer, send a nastygram to that foul pirate, Web-I-Am!
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Unanimous Cow Herd, 30 Aug 2017 @ 8:47am

Re: Re: Re:
LOL. Netflix would have ended up being a Hulu if the cable companies had bought it.
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Mason Wheeler (profile), 30 Aug 2017 @ 8:49am

Re:
Ugh. Hey Techdirt, your parser is severely broken, and various attempts to fix it using Markdown that the link claims is supported also fail. This is about the best I can make it do, and it's still ugly. :(

Trying again:
- Would you stream to set-top box?
- Would you stream ABC or Fox?
- Would you stream into my house,
- where I can start streams with my mouse?
- Would you please stream Game of Thrones?
- "No!" replied the marketing drones!
- I do not like that stream flim-flam,
- I do not like it, Web-I-Am!
- I will not stream to set-top box,
- I will not stream ABC or Fox!
- I will not stream into your house,
- where you can start streams with your mouse!
- It'd put our finances in a jam,
- I will not stream it, Web-I-Am!
- You do not like it, so you say,
- but try it, try it and you may.
- Web, if you will leave me be,
- I'll stream something, and you'll see.
- I'll run it past the marketing drones,
- we'll try streaming Game of Thrones.
...
- How can this be? Accountants say,
- there's tons of money coming our way.
- It's popular, and you know what?
- Even once Apple takes their cut,
- we're making twenty million more
- on streaming than we made before.
- I guess I like this stream flim-flam,
- I do, I like it, Web-I-Am!
- But as we are still HBO,
- alternative streams have to go.
- Hey, lawyer, send a nastygram
- to that foul pirate, Web-I-Am!
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crade (profile), 30 Aug 2017 @ 8:52am

Re: Re: Re:
Yeah thats the trouble, they would never buy netflix and switch to doing that instead of cable, which is what would be required. If they try to maintain the cash cow, they would need to ensure netflix isn't successful which basically means the competition would overtake them
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Anonymous Coward, 30 Aug 2017 @ 8:55am

What a big pie of moo-taphor.
Can't you write plainly? Once for "cash cow" would be fine, but you exhibit a mania. You guys (IF you're not AI bots) all seem to think that mixing and mangling phrases adds interest and persuades better, but doesn't. It's a schoolgirl style that only causes readers to doubt your sobriety.

The result of over-use is I've forgotten the topic you started with because you distracted me by inserting a new topic. -- So in fact I'm now ON-topic.

Mainly, I'm not at all sure you grasp that "cash cow" is slang for an area that supports LOSSES:

cash cow = [Slang] Business a profitable asset or resource, as a subsidiary company, producing excess funds that are used to finance investment in other areas, support unprofitable ventures, etc.

Undermined your own premise! Implies HBO is losing money elsewhere, see?

Writing tip of the day: ALWAYS look up rarely used words and phrases, especially if rural references adopted by city folk lacking practical experience. -- THEN EVEN IF APT, DON'T TRY TO SPICE UP.
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crade (profile), 30 Aug 2017 @ 9:01am

Re: Re: Re: Re:
The more common route is to buy netflix but also buy some sneaky legislation so they don't need to worry about competitors succeeding, then make netflix really bad so everyone is basically stuck with cable. Like with sports for example
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Anonymous Coward, 30 Aug 2017 @ 9:03am

Re: Re: Mason Wheeler drivel.
Sheesh. You spent time and trouble to get that in?
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JEDIDIAH, 30 Aug 2017 @ 9:09am

Re: And how do you know it's a "windfall"?
HBO likely had legacy agreements that it could not ignore. There tend to be ugly consequences of blowing off a contract. Once those went away, HBO was more free to examine new options.

Also, they have always been a separate line item ala carte service. Moving to streaming is a much more simple and direct thing for them.
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Roger Strong (profile), 30 Aug 2017 @ 9:16am

So while offering a standalone streaming platform was essential in evolutionary context, HBO consistently insisted it just couldn't make the economics work for such an option.

Well, of course. The Sarah Palin Channel only lasted a year before folding.
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JoeCool (profile), 30 Aug 2017 @ 9:25am

Re: Re: Re: Mason Wheeler drivel.
It's pretty funny, and much better than his usual posts. ;)
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JoeCool (profile), 30 Aug 2017 @ 9:28am

Re: What a big pie of moo-taphor.
You're definition is weird and unusual. Here's the NORMAL definition of cash cow:

cash cow
ˈkaSH ˌkou/
noun informal
noun: cash cow; plural noun: cash cows; noun: cashcow; plural noun: cashcows

a business, investment, or product that provides a steady income or profit.
"traditional cash cows like cars and VCRs"
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JoeCool (profile), 30 Aug 2017 @ 9:28am

Re: Re: What a big pie of moo-taphor.
You're -> your... still need that edit button!
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Anonymous Coward, 30 Aug 2017 @ 9:32am

Re: What a big pie of moo-taphor.
Writing tip of the day. CAPS LOCK is cruise control for cool.
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Anonymous Coward, 30 Aug 2017 @ 9:34am

Re: Re: What a big pie of moo-taphor.
Sheesh. Your definition doesn't refute mine, just doesn't include the key point. You only prove that DON'T know why the phrase "cash cow" originated. Why add "cash" to the ordinary cow if wasn't notable from the others? HMM?
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Anonymous Coward, 30 Aug 2017 @ 9:41am

Re: Re: What a big pie of moo-taphor.
>>> Writing tip of the day. CAPS LOCK is cruise control for cool.

First, that doesn't make sense.

2nd, plainly I wanted to SHOUT.

3rd, an AC one-liner adds nothing, nor do even my numbered points.

4th, my key on-topic point is that "cash cow" refers to the one or few among a herd which are actually bringing in money, not literally eating up time and efforts, with risk of getting sick and outright dying, none of which actual risks of owning / raising cattle you city netwits are familiar with, and using the phrase too much and then wrongly is just hootable, so I hooted.
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Jeffrey Nonken (profile), 30 Aug 2017 @ 10:01am

Re: Re: Re: Re: Mason Wheeler drivel.
1) I kind of liked it. I expect others will appreciate it too.
2) His time and effort to spend how he deems fit.
3) If you didn't like it, skip it and go on with your life.

Sheesh. You spent time and trouble to kvetch about it?
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Anonymous Coward, 30 Aug 2017 @ 10:08am

Re: Re: And how do you know it's a "windfall"?

HBO likely had legacy agreements that it could not ignore. ... Once those went away, HBO was more free to examine new options.

That's unlikely. Game of Thrones started in 2011, when it was already unreasonable to be in denial about cord-cutting. If they couldn't stream "HBO" content online, they could have started some new TV channel or streaming service and put it there until the cable companies let them put "HBO" online. By now, they should have had several opportunities to renegotiate; one doesn't sign long-term (more than a year or two) contracts with companies in dying industries.
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Anonymous Coward, 30 Aug 2017 @ 10:22am

Re: Re: Re:
netflix was never in the cable company radar. it started off as a rental service and only blockbuster was worried.

the cable companies would never have seen the value of netflix even if it was pointed out to them.
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Anonymous Coward, 30 Aug 2017 @ 10:37am

Re: Re: Re: And how do you know it's a "windfall"?

By now, they should have had several opportunities to renegotiate; one doesn't sign long-term (more than a year or two) contracts with companies in dying industries.

Why not, if you are the dying industry, once you go bust it becomes the receiver problem, and if you are relying on that industry for income, it gives you a good claim on whatever value is left when they go bust.
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Jeffrey Nonken (profile), 30 Aug 2017 @ 10:57am

If I were a GoT fan I'd seriously buy the service. Not a fan. But ofc. that means I don't download it, either.

(What that means is that HBO isn't making any money off me. But if I downloaded it from Pirate Bay, they would be making exactly as much off me, and at the same cost. So getting their panties in a bunch over it doesn't impress me.)

I'm currently a customer of Netflix and just coming up on my first month of Hulu. There's a lot of content and I'm pretty happy. Like I said, if I were a fan -- or interested enough in any HBO content -- I'd be there in a second.

I'd rather stream it through a paid service than download it. Maybe even enough to add another service to my list just for one show. Because basically I know that once I get the service, I'll be watching other stuff too, and I'll get my money's worth in the end.

Having the streaming services is WAY too convenient compared to trying to track down active, quality rips across multiple bittorrent services. If I couldn't afford it, of course, I might feel differently; but now that I can, I'm happy to pay them.

(And if I can't afford it, I can't afford it. They don't get my money either way. But if I'm a poor fan now, I'm probably a future paying customer. Unless, of course, they piss me off. Or sue me into poverty.)
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crade (profile), 30 Aug 2017 @ 11:16am

Re: What a big pie of moo-taphor.
wut? why you no making the sense? you drunk bro?
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Anonymous Coward, 30 Aug 2017 @ 11:17am

Re: Re: Re: Re: And how do you know it's a "windfall"?

if you are relying on that industry for income, it gives you a good claim on whatever value is left when they go bust

Well, don't sign contracts that limit your ability to evolve. It's fine for HBO to guarantee to the cable companies that they'll be able to get HBO for the next decade, but stupid to say that HBO won't compete with those cable companies for a decade.
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Anonymous Coward, 30 Aug 2017 @ 12:05pm

Re: Re: Re: Re: Re: And how do you know it's a "windfall"?
Except, it is the artificial restraints on distribution to create exclusivity that is at the heart of the content industries business model. It has allowed them to overvalue their content, because it allowed premium pricing.
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Stephen T. Stone (profile), 30 Aug 2017 @ 2:05pm

Re: Re: Re: What a big pie of moo-taphor.
How a company spends the money brought in by a "cash cow" does not matter to the definition of that phrase.
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Rod, 30 Aug 2017 @ 2:22pm

Cable company cash cow options
They do have an option... and they're exercising it. They're lobbying your government to end Net Neutrality so they can make it more expensive to go online than to pay for traditional cable.
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shane (profile), 30 Aug 2017 @ 3:45pm

Trump Effect Probably Encouraging Cord Cutting
Cable was a convenient way to get what you thought you wanted and needed. As so much of mainstream media becomes odious to the general population, they become more and more comfortable with just saying no to a lot of TV that previously formed a comforting part of their daily lives.

Recently I have utterly changed my opinion about piracy, and while I myself still prefer to fight this fight against big media by refusing to use their products, I believe copyright is evil, and people willing to break it are doing society a service.

It may be a bit of a stretch to compare them to patriots in times past that risked their lives for their country, but violating copyright DOES have some serious repercussions, and yet they do the right thing and refuse to pay into the corporate media monopolies, thus helping to undermine their propaganda by making it harder to use entertainment money to help pay for their domination of the infrastructure.
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Kronomex, 30 Aug 2017 @ 11:34pm

For the life of me I can't work out what the huge, almost orgasmic, carrying on in the media regarding Game of Thrones is all about. I still can't get past page 28 of the first book even after multiple attempts, there is something about it that annoys the hell out of me. Gave up watching the TV series at the end of the second season and have no intention of reading the former and watching the latter.
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The Wanderer (profile), 31 Aug 2017 @ 4:35am

Re: Re: Re: What a big pie of moo-taphor.
Because it's not "cow" vs. "cash cow", it's "milch cow" vs. "cash cow".

An ordinary cow provides a steady supply of milk, whereas these metaphorical cows provide a steady supply of cash.

Your idea of the origin of the phrase is odd, and does not seem to fit the facts as I understand them. If you want to convince people that yours is the correct etymology, you'll need to cite etymological research to that end. (And, probably, also stop insulting people for being wrong about it.)
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Anonymous Coward, 31 Aug 2017 @ 6:44am

getting what we wanted
a la carte TV is already here. it's called "streaming"
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PRMan, 31 Aug 2017 @ 11:27am

Re: Re:
The buggy whip manufacturers did buy and shutter several automakers. They passed red flag laws to prevent driving and everything.

But you don't remember them because they haven't been around in your lifetime.
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nasch (profile), 1 Sep 2017 @ 7:46am

Re: Re: Re:
That's the point right? Despite their best efforts, they're gone now and cars have taken over.
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nasch (profile), 1 Sep 2017 @ 7:52am

Re: What a big pie of moo-taphor.

The result of over-use is I've forgotten the topic you started with because you distracted me by inserting a new topic.

Maybe you should stick to reading twitter. It's short enough you can get to the end without getting distracted by, you know, more words.
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Anonymous Coward, 5 Sep 2017 @ 9:02pm

Re: Re: Re: What a big pie of moo-taphor.
You want to shout, you get a DMCA vote.
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