HBO Go may soon be available to non-cable-TV subscribers as an online-only streaming product, just like Netflix. That’s cause for celebration for Game of Thrones fans, many of whom have been, ahem, “borrowing” a cable login from their friend’s room mate’s dad for the last few years, or outright pirating the goods on Sunday nights.
The move marks a major sea change for the TV industry. For the last year, Time Warner CEO Jeff Bewkes has repeatedly dismissed suggestions that HBO Go would become available on online-only streaming platforms. But at a Goldman Sachs communications conference last week, he said he was rethinking it. “Up until now” the idea wasn’t attractive, he said, but now that “the broadband opportunity is getting bigger,” it’s becoming “more viable and more interesting.”
Bewkes’ suggestion has ignited a debate among TV-industry insiders: Is this the beginning of the end for the traditional pay-TV model? If HBO goes the Netflix route, what’s to stop ESPN or Discovery or the Food Channel from following suit? And is this a nail in the coffin of “TV Everywhere,” the pay-TV industry’s online streaming collaboration that Bewkes himself has proudly backed?
The short answer to all those questions is that the doomsayers are generally right: the traditional pay-TV model—wherein customers are prodded into paying upwards of $150 a month for a bundle of thousands of channels they don’t watch—will meet increasingly steep resistance in coming years. After all, we live in world where we’ve all become accustomed to getting our media (songs, magazine articles, you name it) on-demand and a la carte. And if HBO Go and Showtime actually do “go rogue,” so to speak, it does amount to a major blow to the joint “TV Everywhere” campaign, which was designed to keep pay-TV subscribers loyal to their TV providers by allowing them to watch TV online through any device they wanted, but only after signing in through a pay-TV portal. Those customers who were paying for cable primarily to watch HBO will no longer have a reason to pay for traditional TV at all.
But the longer answer is that while we are undoubtedly standing on the precipice of major changes in the traditional pay-TV business model, the biggest players in both the TV distribution and programming markets are hardly in existential crisis.
For one, all the biggest cable and fiber companies—Comcast, Time Warner Cable, Charter, Verizon—are actually poised to benefit from Americans’ increasing demand for online streaming, a service that requires super-fast Internet connections. Unlike satellite TV companies, like Dish and DirecTV, which for technical reasons cannot offer fast, affordable broadband Internet, and are therefore most effected by the trend toward online video consumption, big cable companies have actually seen their total profits sky rocket in recent years, driven largely by broadband subscribers in search of the fastest-available service. Comcast in particular is in the cat-bird seat. If regulators approve its proposed $45.2 billion merger withTime Warner Cable this year, the new Comcast could control up to 70% of all the broadband Internet connections in the country that are fast enough to replace a household’s TV—i.e., to stream several HD videos simultaneously.
For another, even if HBO Go goes the way of Netflix tomorrow, the move is unlikely to catalyze a similar mass exodus among other smaller channels immediately, since they are unlikely to find in direct streaming the sort of revenue they can get from on the traditional pay-TV model. Even the biggest programmers, like Disney and Viacom, still make the bulk of their revenue from partnering with pay-TV distributors, like Comcast, Time Warner Cable, and Verizon, which pay them large “retransmission fees” to license their content. For example, pay-TV companies currently pay ESPN, which is owned by Disney, an average of about $7 per cable subscriber per month, even though the overwhelming majority of all pay-TV customers don’t even watch ESPN.
The TV distributors, meanwhile, still have the potential ability to punish smaller channels if they find other routes for distribution. As it stands, licensing agreements usually include language that limits a programmer’s ability to make its content available online. For smaller stations that stray, big pay-TV companies can try to reduce the amount they pay a programmer in retrans fees, thus levying a significant blow to a programmers’ revenue stream. Big pay-TV companies, like Comcast, which already controls access to more than 20 million households, can also “punish” a programmer by moving its channels from a popular bundle to another, less popular bundle in their pay-TV offerings. A demotion like that would have the effect of decimating the number of people who see a programmer’s content, which in turn, would wreak havoc on its advertising revenue.
Of course, as more and more people begin to stream online video, the power dynamic between programmers and pay-TV distributors will shift. Already, online video consumption grew by 71% in the U.S. between 2012 and 2013, according to Nielsen. And while the number of outright “cord-cutters”—customers who ditched their pay-TV bill completely in favor of streaming services—is still less than 5% of the population, it’s growing every year. According to a study released last week, 49% of TV watchers between the ages of 25 and 34 say they’re “likely” to stop paying for cable TV in the next year. A ClearVoice Research study this week indicates that one in eight users plan to discontinue their cable service; 74% plan to do so this year.
- Inside the Massive Effort to Change the Way Kids Are Taught to Read
- Dubai's Real Estate Market is Booming. One Company is Making It Possible to Invest From Anywhere in the World
- How to Exercise When It's Really Hot Outside
- A New Documentary Sheds Light on a Pivotal Movement in Asian American History
- Far From Home: Afghan Women are Attempting to Build New Lives Abroad
- What Experts Say About How Valuable The Inflation Reduction Act's Green Subsidies Will Be
- What to Know About Long COVID in Kids
- Want to Do More Good? This Movement Might Have the Answer