For cord-cutters, the anticipation is already building after today’s announcement that the popular pay-cable behemoth HBO will offer standalone subscriptions that allow those without cable TV to watch its popular shows on the internet starting next year.
But this new enterprise may not all be smooth sailing—the company has questions to answer, and a web-only presence comes with various potential complications.
For the first time, HBO will have a direct relationship with its customers
With no cable middleman, HBO will now have to market its internet product itself, handle the billing, ramp up its customer service, and placate the inevitable occasional hordes of angry Game of Thrones fans whose streams have frozen. HBO has done none of these things before, a point that company execs are keenly aware of. James McQuivey, an analyst for Forrester, says these will be relatively easy issues for HBO to confront.“They’ve been preparing for this for awhile,” he tells Quartz. “None of this is going to be a surprise to them.”
But among these hurdles, customer service is likely to be the biggest nuisance. “It will be a pain, and there will be some high profile mistakes,” McQuivey says. Still, he points out, cable TV is hardly trouble-free. “Guaranteeing quality over streaming is a lot easier to do than guaranteeing quality over a cable box,” he said.
HBO will need to build the infrastructure to reliably stream content
HBO Go, the company’s current bonus app for its cable subscribers, infamously crashed earlier this year during the finale of the wildly popular show True Detective. It can’t afford incidents like that once there are millions of new HBO subscribers paying specifically to have their favorite content streamed online. Jeff Bewkes, the CEO of HBO’s parent company, Time Warner said on its second-quarter earnings call that HBO was “investing in top talent”—including a fleet of software developers based out of Seattle. It’s unclear if this investment will be devoted solely to the new online service, but it seems likely.
Direct competition with Netflix will cause pricing pressure
HBO has long tried to deny that Netflix is a true competitor. When it offers a standalone HBO Go, the company will have to accept—and embrace—the competition with Netflix, starting with prices. Netflix is currently priced at a modest $8.99 for a streaming-only subscription. Before today’s announcement, some analysts predicted that a possible standalone HBO Go would cost somewhat more than that, and could offer different tiers of service at different prices.
What content will be available?
The company has a vast library of old shows, all currently available on HBO Go and many now also on Amazon Prime Instant Video (some have actually speculated that HBO could team up directly with Amazon for the new service, though McQuivey says that’s unlikely), but it remains to be seen whether the standalone version of HBO Go would include this whole stash. Another question is whether HBO can employ the power and reach of Time Warner to include movies and shows owned by Warner Brothers and Turner Broadcasting. If the standalone web option offered all HBO shows—current and past—as well as a catalog of content owned by Time Warner’s other properties, it might be able to justify a higher subscription price than Netflix.
This will probably upset cable companies. But what will they do about it?
Cutting HBO out of cable bundles completely would probably trigger an extreme backlash from subscribers; and anyhow, HBO would still be among cable companies’ most lucrative add-ons, even if a web-only version existed independently of bundles. But McQuivey says that HBO’s relationship with cable companies will be by far its biggest challenge. What cable companies could do is goad HBO into giving them the rights to HBO’s content for a cheaper price. And HBO might have to cut traffic deals with Comcast and the other major providers, similar to what Netflix has done.
In the end, though, cable companies—which will still make most of their profits off broadband subscriptions—will adapt and survive. “Even though psychologically this is a big hit for the cable companies, because they banked on having HBO as an exclusive thing to offer, once they get over it they’ll realize that in the long run this is where it was going to go anyway,” McQuivey said.
For HBO, the road to success as a standalone internet service may be rocky. But for cord-cutters, just the announcement that such a service will soon be available is a massive victory, and bodes well for a more competitive marketplace. Let the game for the throne of streaming commence.