HBO's Online Shift: A Game Changer?
|
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
Excerpts
The Need for a New Service
By the late 2000s, industry observers thought that the US cable industry was in serious need of an overhaul. As per industry practice, the cable operators grouped several channels together into different 'bundles' that were offered at various subscription price points. Unpopular channels were bundled with the popular ones, not only to sell channels that had a limited market appeal, but also to raise the subscription price citing the high number of channels offered in each bundle. It was observed that during the decade 1995 to 2005, the number of channels that were offered to US TV viewers through bundles had doubled and the cable bills had risen almost three times faster than the US inflation rates...
HBO's Online Shift
Nonetheless, the rapid changes sweeping through the US cable industry made HBO do a rethink of its future prospects with cable operators. Beginning 2013, the cable industry began to lose subscribers at a rapid rate. In addition, a Nielsen study pointed out that TV viewership in the US was dropping at 10% each quarter. The rising usage of computers and smartphones meant that consumers were increasingly looking for entertainment online at their preferred timings. Various customer studies also pointed out that TV viewers had become tired of the "all or nothing" service plan of cable operators....
Introduction of HBO Now
Gradually, HBO realized that the future of TV was online, which prompted it to launch its new streaming service called 'HBO Now', through a partnership with Apple. HBO worked with Apple for almost a year to thrash out the details of the deal. It believed that the partnership with Apple would be highly beneficial for the new service. It pointed out that almost 60% of the people who downloaded the HBO GO app were users of Apple devices. In addition, HBO expected the considerable marketing power of Apple to support the promotion of HBO Now. HBO Now was also expected to enhance Apple TV's...
Impact on Cable Industry
Industry observers strongly believed that HBO, along with several sports channels, was the prime reason US TV viewers were ready to shell out almost US$ 100 for bundled cable services. HBO's move into the online streaming space was expected to bring about considerable changes in the US cable TV industry. Analysts wondered whether HBO’s online move would prompt more TV networks to move online or to offer their programs online. Many cable TV subscribers already found the business practices of US cable TV operators suspect. The US cable TV industry was an oligopoly,...
Entry of Other Players in the Online Streaming Services Space
HBO's online move was expected to spawn the launch of similar services from other TV channels. In October 2014, CBS Inc. launched an online streaming service called 'CBS All Access' featuring the network’s current and past shows at a price of US$ 5.99. Speaking about the new service, Leslie Moonves, Chief Executive of CBS, said, "This new subscription service will deliver the most of CBS to our biggest fans while being additive to the overall ecosystem. Across the board, we continue to capitalize on technological advances that help consumers engage with our world-class programming."...
Road Ahead
In 2014, HBO added three million subscribers, the highest in the previous 30 years of its existence, primarily due to the rising popularity of its original programs. The company also had an operating income of US$ 1.79 billion. Analysts expected the company to add still more subscribers owing to its HBO Now service in 2015. According to Richard Greenfield, an analyst at BTIG, HBO Now was able to attract anywhere between 850,000 and 1 million subscribers by June 2015. Speaking about the expected subscriber numbers, Jan Dawson, analyst at technology research firm Jackdaw Research, said, "The realistic scenario is they get some small fraction of the 10 million (cord nevers) and they keep some number of the cord cutters....
Exhibits
Exhibit I: HBO's Worldwide Subscribers From 2010-2014, In Millions
Exhibit II: Revenue Breakup of HBO (2014), in Billions of US$
Exhibit III: Information on Leading Cable TV Operators in the US
Exhibit IV: Leading Online Streaming Services in the US
Exhibit V: Leading Online Digital Media Players
Exhibit VI: Scenario in the US Cable TV Industry, Until 2015
Buy this case study (Please select any one of the payment options)
| Price: Rs.600 |
Price: Rs.600 | PayPal (13 USD) |
