This HBO Announcement is a Much Bigger Deal than Investors Think
Don't feel bad if you missed it. Everybody else did too, but they shouldn't feel bad because this is a big deal-maybe not yet, but if HBO follows through with its plans, it will rock the broadcast TV revenue model.
Here's what you missed. Reuters reported that HBO, owned by Time Warner (NYSE: TWX ) may create a subscription model for its HBO GO service that is tied to a person's internet service instead (or alongside) their cable service.
Cable subscribers know that HBO is an add-on that typically costs an additional $15 per month to add the premium channel. With that, most customers will have access to HBO GO. HBO GO is a streaming service where subscribers can watch HBO content on their smartphone, tablet, laptop or just about anywhere there's high speed internet access.
Unlike sites like Hulu or the major network sites that allow consumers to watch content for free, or even Netflix (NASDAQ: NFLX ) or Apple (NASDAQ: AAPL ) that have subscription service, HBO GO isn't available unless the customer is subscribed to HBO through their cable provider.
HBO GO currently has about 6.5 million subscribers but with wildly popular hit shows like Game of Thrones, that number could substantially increase if its streaming service were offered to non-cable subscribers.
Why is this such a big deal?
Because cable customers are approaching a tipping point. They're tired of paying sometimes more than $100 per month for a bunch of channels they'll never watch. In increasing numbers, they're cutting the cable cord in favor of streaming services like Hulu even if that means watching content days after it airs.
Cable companies have resisted the pressure to offer a more a la carte service, but if HBO breaks from tradition and offers the service as a part of the growing catalog of internet content, it might be the first step in forcing companies like Verizon (NYSE: VZ ), Dish Network (NASDAQ: DISH ) and others to offer more customer friendly options.
Like a junior high dance, once one person breaks from the pack others will follow. Nobody wants to be the first. If HBO steps out, things will change.
But don't expect it any time soon. HBO's Chief Executive Richard Plepler said, "Right now we have the right model. Maybe HBO GO, with our broadband partners, could evolve."
That sounds positive but this is also a case of, "don't bite the hand that feeds you." HBO generates billions from those big, bad cable providers. You can be sure that they're not going to burn those bridges any time soon.
(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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