HBO is going mobile.
The pay TV network on Monday will begin offering its subscribers access to watch HBO programming on Android mobile devices and Apple Inc.'s iPhone and iPad tablet.
“That device has changed television,” HBO Co-President Eric Kessler said this week, pointing to an iPad during an interview at the company’s Santa Monica offices.
HBO hopes the iPad will kick-start HBO Go, the online viewing option for current HBO subscribers that the network launched last year. The move marks a turn for the Time Warner Inc.-owned channel, which was a pioneer in enticing viewers to watch cable TV but has moved cautiously in embracing the Internet.
HBO, however, recognizes that the revolution underway in viewing habits is as profound as the one it helped spark in the 1980s when TV viewers began flocking to cable to watch uncut movies and big-ticket sports events. Company executives have been guarded about putting the network’s programming on the Web, fearful that doing so might give subscribers a reason to drop cable TV service.
“HBO, regardless of how strong their programming is, faces a host of significant challenges to their business — more than at almost any other time in their history,” said Will Richmond, a longtime cable executive and publisher of the Boston-based VideoNuze.com news site. “This is a completely new landscape for HBO.”
HBO has held to a contrarian view about how to approach the Internet. Although broadcast networks have rushed to throw their shows on the Web, HBO has held back, pointing out that cable and satellite TV providers are still — and will remain for some time — the financial bulwark of the pay TV industry.
Still, company executives acknowledge that the Internet and mobile technology is reshaping the way people watch TV. And HBO must adapt, they say, to protect its empire, which generates $1.4 billion annually in operating income — a deep well of profits for parent Time Warner.
HBO Go only recently began to pick up momentum with cable and satellite TV operators that are the gateway for the online option. Heavyweights such as DirecTV signed on after HBO added more than 1,400 hours of programming, including full seasons of such hits as “True Blood” and “The Sopranos” to the HBO Go library. Currently, about 80% of HBO’s homes can access the pay channel’s online service.
People who do not subscribe to the channel through their cable, satellite or telephone provider will not be able to access HBO’s programming online or via mobile devices.
“What we don’t want to do is devalue the brand,” Kessler said. “Our online strategy is about exclusivity.”
The pivot comes as HBO faces stiffer competition from the likes of Showtime, AMC, FX and other cable channels that have ripped a page out of HBO’s upscale play book with shows like “Dexter,” “Mad Men” and “Sons of Anarchy.”
HBO also has witnessed a worrisome incursion by Amazon, Epix and Netflix, as well as cable and satellite TV operators that continue to expand “on-demand” movie offerings. Big-box retailers such as Wal-Mart also are preparing their own movie services.
“It’s a different universe; we accept that,” said Michael Lombardo, HBO’s president of programming.
Marquee Hollywood movies have long been a drawing card for many of HBO’s 28 million subscribers. As such, Time Warner can ill afford to allow Netflix, by offering a low-cost alternative, to encroach on HBO’s turf. Netflix subscribers pay $7.99 a month for a streaming service that lets them pick the movies they want to watch from a vast library.
For HBO, maintaining and growing its subscriber base has been one of its biggest challenges. The channel must sign up or reactivate about 10 million homes annually just to keep even with its subscriber rolls. Last year, HBO and its sister channel Cinemax lost nearly 2 million subscribers.
HBO executives are banking on the online option to slow or, hopefully, reverse subscriber losses. To promote the iPad app, the company is spending about $20 million in a marketing blitz. Advertisements will be popping up during the NBA and NHL finals as well as in several prominent TV season finales next month.
Analysts think it’s the right move.
HBO Go “should help drive HBO’s subscriber performance, as well as reduce investor concerns regarding HBO’s ability to compete with online video providers,” Deutsche Bank analyst Doug Mitchelson said in a recent report.
HBO’s decision to make the online service available only to current subscribers, at no additional charge, was intended, in large measure, to provide an incentive for customers to stay on board. Limiting HBO Go to current subscribers also avoids HBO putting itself in conflict with the cable and satellite TV operators it relies upon to sell the pay channel to subscribers.
“We are targeting the market where, frankly, the money is,” Kessler said.
HBO says there are no current plans to sell HBO Go directly to consumers. That effectively eliminates millions of potential customers who might be inclined to sign up if the service wasn’t tied to a current HBO subscription.
HBO’s approach makes sense, said Deana Myers, a television analyst with SNL Kagan.
“The majority of their revenue still comes from affiliates, and they don’t want to make those companies mad,” she said. “But the world could change very much in the next few years. This sets them up so they can offer a direct-to-consumer option more easily.”
It may be doing a dress rehearsal to get ready for that day.
Later this spring, HBO will make the unprecedented move to premiere an episode of its new hit “Game of Thrones” on the tablet device before it appears on its television channel. The cable network is counting on fans becoming social media apostles for its shows. With a touch of the pad, viewers can alert their Facebook friends that they are watching a program on HBO Go.