ADVERTISEMENT

Don't let the cheap Comcast HBO deal fool you, cord-cutters

(Credit: HBO) HBO Go -- with its deep, constantly refreshing online library of hit shows and movies on demand -- is the cord-cutter's dream, but don't get too excited about a new Comcast pay-television package that offers HBO on the cheap.



(Credit: HBO)

HBO Go -- with its deep, constantly refreshing online library of hit shows and movies on demand -- is the cord-cutter's dream, but don't get too excited about a new Comcast pay-television package that offers HBO on the cheap. Though it looks like progress toward breaking out HBO, it's a big leap from here to getting HBO Go on its own.

And Time Warner, HBO's owner, has signaled it's a leap it has little interest in making.

Thursday, news bubbled up from DSL Reports that Comcast, the biggest cable company in the country by subscribers, was promoting a bundle of services that included HBO with local and basic television channels and broadband service, cheaper than a more comprehensive "double-play" package would cost. A Comcast spokeswoman said the offer is nationwide, though the specifics seemed to vary by region: In New York, it's promoted online for $49.99 in the first 12 months, while elsewhere it cropped up for $39.99.

Comcast is targeting people who are already looking for Internet services and then using HBO as a lure to turn them into two-product customers, or "double play."

A study presented by JP Morgan analysts this week found, like many polls before, that cord-cutting households are still in the minority but a large proportion are on the fence. It found that 7 percent of TV watchers age 18 to 49 were "cord-nevers," people who have never paid to subscribe to a TV service. Ten percent were cord-cutters. A full 40 percent were what they termed "cord considerers," people who subscribe to pay TV and are somewhat or extremely likely to cancel.

For Comcast, HBO is an enticing lure for the group on the fence. Its series routinely garner more Emmy nominations than any other channel, and HBO has been a vanguard of "TV Everywhere," the television industry's initiative to bring more content to Internet-based platforms and mobile devices to people who pay for TV. HBO has been among the most willing of channels to embrace multiple platforms and offer up large amounts of content online.

Part of the reason HBO is so welcoming is that it has a large moat around its content online. It lowers the drawbridge only to people paying for it, and those people are usually paying a higher-end TV subscription. The network's HBO Go app and Web portal provide unlimited access to movies and shows -- both current and past -- on demand, but access is limited to people who already have a pay-TV subscription including HBO through a distributor like a cable company or satellite provider.

That makes shows like "Game of Thrones" tantalizingly close for people who enjoy watching TV online or on their devices, but puts the content still out of reach for those who have already cut or want to cut the cable company out of the equation.

But Comcast's offer this week tweaks the norm. This is the first time that Comcast is offering HBO as part of a lower-cost package. The company previously has offered bundles that provide broadband services plus an economy television subscription that -- largely because it lacks live sports channels -- is cheaper than more complete packages, but HBO is new.

And while this could make HBO more palatable to some people fed up with pricey cable bills, it isn't much of a signal that HBO Go is any closer to being offered directly to consumers.

For one, Comcast is a cable company, and cable companies are holding formation against becoming purveyors of Internet-delivered TV service. After making decades of big investments in their distribution infrastructure, cable companies want people to be watching video by paying for a video service. Though they're happy to provide video on multiple platforms, they're toeing the line that subscribers must be paying for their TV service to get it.

The No. 1 reason Comcast's offer shouldn't signal the start to an HBO-loving cord-cutter's dream: Time Warner brass isn't interested in them as customers, even though there's definite demand. The JP Morgan study found that a stand-alone premium content service like HBO Go or Showtime Anytime could sway 62 percent of that group to drop their existing cable service.

Time Warner didn't respond to an e-mail seeking comment.

Two months ago, Time Warner Chief Executive Jeffrey L. Bewkes said he was very interested in the idea of bundling HBO with a broadband data service, and the Comcast offer brings his company closer to that. However, he wasn't very interested in pursuing customers who aren't paying for television service already.

"You often hear that question about 'over-the-top' as though the real opportunity are the people that have broadband but not TV," he said at a Goldman Sachs media conference in September. "Where do you think the likely next subscriber is? Is it the 70 million homes that have bought 200 channels of stuff and they haven't bought HBO? Or is it the 5 million or 10 million that didn't buy either HBO or that?"

"It's pretty obvious, it's the 70 million up. So we're working more on that."

Erik Brannon, analyst for US television at IHS, noted that if any service is in the crosshairs of Comcast's offer, it's Netflix.

"With Netflix, you do get a significant selection of content, but when we bundle in HBO and StreamPix [Comcast's online on-demand streaming service] plus the broadcast basics, you've covered several significant bases," he said. It gives customers a significant amount of content, it will make it available on the move, and it provides first-run movies months before Netflix, he said.

"Pay TV dug itself a hole by not thinking creatively with packages," he said. "There's a tremendous opportunity for pay TV to win back."

It comes the same week that Netflix was frequently bandied about in the press for possibly eclipsing HBO in the number of US subscribers when it reported earnings.

But he isn't holding his breath for a direct-to-consumer HBO.

"I don't see that HBO is going to break the bonds with pay TV," he said. "They both have too much at stake to be rocking the boat."

Share this Article:

Comments

You must sign in or register as a ScientificAmerican.com member to submit a comment.
Scientific American Special Universe

Get the latest Special Collector's edition

Secrets of the Universe: Past, Present, Future

Order Now >

X

Email this Article

X