HBO Putting Shows Online, at No Additional Charge
HBO, cable's most popular premium channel, is carefully entering the arena of Internet video. — The channel, a subsidiary of Time Warner, will introduce HBO on Broadband starting this week to subscribers in Green Bay and Milwaukee …
Context & Ripple Effects
HBO's Green Bay and Milwaukee rollout turns the ambition in its earlier broadband plans into a subscriber-facing test. The service is being offered as an extension of the existing premium subscription, not as a separately priced Internet product.
For Time Warner, the pilot puts a major cable brand into online video while retaining the cable subscription as the customer relationship and payment mechanism.
First-order effects
- HBO subscribers in the two Wisconsin markets gain online access to HBO programming without an added fee, making the premium subscription usable beyond the television set.
- HBO and parent Time Warner get a live test of delivering a premium channel online while limiting access to paying subscribers.
Second-order effects
- Cable operators carrying HBO face pressure to support authenticated online access for their premium customers, rather than treating web viewing as a separate retail product.
- HBO’s no-extra-charge design protects the value of the cable bundle, but makes online access an expected part of a premium-channel subscription.
Third-order effects
- If premium networks follow this model, Internet video is likely to develop first as a feature of pay-TV authentication rather than an immediate replacement for the cable bundle.
- The central strategic tension becomes expanding HBO online without weakening the distributors that supply its subscriber base.
The trend: Premium television is beginning to use online video to extend paid subscriptions while managing the risk of bundle cannibalization.