HBO's Online Shift: A Game Changer?
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Case Code: BSTR482 Case Length: 17 Pages Period: 1972-2015 Pub Date: -- Teaching Note: Available |
Price: Rs.600 Organization: Home Box Office, Inc. Industry: Cable Industry Countries: US Themes: Business Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
Introduction
In April 2015, Home Box Office, Inc. (HBO) introduced its new online streaming service called 'HBO Now'. Through the new service, subscribers could watch HBO TV shows (past and current seasons) and movies online, without a cable subscription. The service was exclusive to Apple Inc. devices (iPhones and iPads) and Apple TV for a period of three months. HBO's online move was set to trigger a tectonic shift in the US cable TV industry, as it was the first time that a premium cable channel was being offered directly to customers, rather than through a bundled package.
HBO, founded in 1972, was widely regarded as a pioneer in the US cable TV industry with several firsts to its credit. It was the first TV network in the US to broadcast nationally through satellite, the first to digitally transmit its service, the first to broadcast a HD version of its channel, and the first to launch a subscription video-on-demand 7 service, among other things.
From its initial days, HBO was one of the costliest channels on offer in the US and cable TV operators generally offered it as part of a bundled package. By the late 2000s, the bundled packages offered by cable TV operators had become fatter and costlier. This trend was in no way favorable to TV viewers, who were forced to subscribe to high-cost TV bundles in which they did not watch a majority of channels. The introduction of online streaming services or over-the-top (OTT) 8 technology provided US TV viewers with another option to watch TV channels of their choice, at times and places which were convenient to them. This prompted many TV viewers to "cut the cord" i.e. cut their expensive cable connections in order to view TV channels over the Internet.
HBO, along with other TV channels, initially ignored the growing popularity of online subscription services and displayed a hesitation to disrupt the well-set practices in the US cable TV industry. However, it gradually began to realize that online subscription services formed a large untapped market, with the potential to bring in new kinds of subscribers. Hence, in 2015, it became the first major TV channel to launch its own online streaming service.
Most analysts believed that HBO's move into the online space would not totally change the business model of the US cable industry, as sports channels – considered to be the glue of bundled packages – were still offered only on cable. However, they believed that HBO's new service would nudge other TV channels to offer similar services online, lead to slimmer TV bundles, and increase cord cutting to an extent.
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