30 November 2011

HBO Go - new info from VideoSchmooze:NYC

Eric Kessler, co-president of HBO, was the first speaker today at VideoNuze's VideoSchmooze:NYC and he shared a number of interesting facts and stories about the HBO Go service. (For those unfamiliar with it, HBO Go is an app or browser-based service which provides HBO subscribers with access to essentially all current series and movies on the service on an on-demand, Internet-delivered basis. The content offering is about 1600 hours and does not include the linear channel.) According to Kessler, the primary motivation was to extend the subscription term for an HBO subscriber. About 10 million people buy HBO each year. Some last for a few months, some stay on forever. The lower the churn (rate of disconnection), the better HBO's revenue and, since it is largely a fixed cost business, the increased revenue disproportionately drops to the bottom line. He put this in the context of HBO using technology in this manner before -- multiplex feeds (now 7 of them) and on demand (typically 150 hours of content).

  • The app launched on May 1, 2011 and launched on the browser a year earlier.
  • About 55% of viewing is on a computer; 45% is on a mobile device (e.g., tablet, smartphone, iPod touch).
  • Of the mobile device viewing, 55% is on the iPad, 25-30% is on the iPhone and the rest is on Android phones (it is on 22 Android smartphone models, but no Android tablets).
  • 70-72% of viewing on Go is to HBO original programs. On the channels originals are 30% of viewing; they are 43% of viewing on demand.
  • The rest of the viewing (30%) is recent movies -- not library titles.
When the service launched on the browser, it only had 400 hours of content and the concept was that seasons of series would move in and out of the window (e.g., this month The Wire Season 3, Sopranos Season 4, Deadwood Season 1; next month The Wire Season 4...). It was well received, but the consistent feedback was "give us everything" -- expectations for online streaming and home video (set by Netflix) were to be able to get most everything in the catalog. You could start with Season 1 of a well-regarded but little seen show like The Wire at any time. Once HBO made this move, it greatly increased the value perception of Go.

One audience question was "does it cannibalize HBO home video?". Kessler laid out the following facts:
  • 50% of home video is from HBO non-subscribers -- Go shouldn't have an impact on that
  • 20% of home video is from HBO subscribers who want to have the physical disc - Go shouldn't have an impact on that
  • subscriptions are 80% of HBO's business and home video is 20%, if some home video gets cannibalized (and DVD sales are declining systemically anyway), then it looks like the benefit is worth the cost
Kessler had little enthusiasm for separating Go from HBO subscriptions sold by multichannel distributors. "HBO customers watch 14% more television than average. They are the last people who are going to cut the cord." Of the 115-117 million TV households, 102 million are multichannel subscribers. "You don't want to undercut the affiliates for a few hundred thousand subs."

Kessler similarly had little enthusiasm for selling HBO programs to any other streaming provider like Netflix -- "It would be like selling to Showtime. They are our competitors."

HBO looks to be doing a great job of building a service that supports the core multichannel subscription television and also addresses that business's greatest weakness - a lack of direct connection with the consumer for the future time when working through the multichannel distributor might not be the only attractive option.

Interestingly, a panelist in a later session, Marcien Jenckes of Comcast noted that as many people watch Dexter via illegal BitTorrent downloads than on its TV home, Showtime. Showtime does have a video streaming service Showtime Anytime, but it does not appear to be as well regarded as HBO's Go.

Updated 1 December 2011 with additional coverage:
VideoNuze (focus on decision to work solely through multichannel distributors)
Multichannel News (focused on cable industry Go-related spats)
Paid Content (focused on impact on, and appeal to, cord-cutters)

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