HBO has embraced Netflix’s business model, but not its net neutrality politics

Worthy of applause.
Worthy of applause.
Image: HBO
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Yes, HBO will finally start selling standalone, online-only packages next year. But while the über-popular premium channel is copying the direct-to-consumer distribution method created by Netflix, it won’t be campaigning for a fairer internet like its rival vociferously does.

Jeff Bewkes, the CEO of HBO’s parent, the media conglomerate Time Warner, was asked at a big meeting with investors Wednesday, “Where do you stand on net neutrality?” That’s the concept, championed by Netflix, that all data on the internet should be treated equally. Up until earlier this year, it basically was a legally binding principle until it was challenged, successfully, by the big internet companies.

Here was his response:

So on the very not-easy-to-understand political concept of net neutrality … we all know that every night in the United States, a big piece of the broadband capacity of the country is being used probably by Netflix and YouTube. And if you add a lot more programming, I mean, I think the viewing of digital stuff, Mike, what is it, 10%?

[Michael Koeplan, Time Warner head of investor relations]

Roughly 10%.


So if you add a lot more view into that system, there’s going to be a strain on that system. And therefore, the very important partners that we all have and all of us—by that, I mean the traditional media networks, companies like Netflix and Amazon—we all have to use this broadband and streaming structure as it evolves to the capability to deliver more digital stuff, not just to your home but your broadband—I mean, to your mobile and all that.

So they’re going to need—there’s going to need to be an evolution of financial support to pay for—to continue to maintain the ability of the broadband infrastructure to do digital delivered programming. If you—that’s really the truth underneath the various positions that people said about something called net neutrality. This is simply a question of if we’re going to move more use into that system and we’re going to have more Americans using that, it has to be supported economically in some fashion.

Hang on a second! This talk of “financial support” to pay for infrastructure and seems surprisingly sympathetic to the concerns of cable companies, especially for a content owner about to embark on an online, direct-to-consumer offering that will require significant amounts of bandwidth to be viable.

The contrast with Netflix is striking. Its CEO, Reed Hastings, has been engaged in a war of words with big internet service providers (most prominently Comcast), accusing them of forcing Netflix to pay more money to ensure its service is pumped out smoothly to users.

For their part, the big ISPs claim that Netflix is the single biggest driver of internet traffic in the US (consuming up to a third of all bandwidth). They want to be allowed to charge big bandwidth users for access to internet “fast lanes” that provide a better experience for viewers.

So why are Time Warner and Netflix so far apart on an issue that, in theory, should unite them? Well, it’s also worth noting here that it was only five years ago that Time Warner spun off its Time Warner Cable division, now a standalone company with 15.1 million customers in 29 US states.

And that’s not the only ISP with ties to Time Warner. As Bewkes indirectly pointed out, HBO has close business relationships with all of the cable and telecom companies that, at the moment, exclusively sell the premium channel over their ISPs. Details about HBO’s new, internet-only packages remain sketchy, but regardless of what form they end up taking, cable companies will still be selling HBO to their customers, and will remain for the foreseeable future an important distribution channel for Time Warner properties.

Do these enduring business relationships mean HBO/Time Warner will get access to fast lanes on preferential terms? We can’t be sure, although slimmer packages that basically offer just broadband plus HBO arguably would achieve that. (We’ll update this post if Time Warner responds to our request for a comment on that.)

At any rate, Time Warner and HBO can probably afford to pay up if the ISPs insist. HBO alone is more profitable than Netflix, and the Time Warner media empire completely dwarfs it (generating 30 times the profit Netflix did last year).

Ultimately, if people were hoping that HBO’s embrace of online streaming would add another powerful voice to chorus of concerns about net neutrality, they are probably going to be disappointed.