Time Warner’s HBO unit has created some of the most original programming on television over the past decade but efforts to make the programming available online have been snagged in the webs of legal contracts. As a subscription service, HBO’s distribution agreements with cable and satellite providers stand in the way. That remains a problem but Tuesday, HBO is set to try again.
Their new service, called “HBO on Broadband” will provide access to about 400 hours of programming a month. The full library of HBO content will not be available. Also, only existing subscribers to HBO’s TV programming will be able to participate.
The test is being offered purely a small scale pilot program. It will initially be limited to Green Bay and Milwaukee, Wisconsin. If the program succeeds, it may expand to other geographies
Even if it does, the limits won’t just be territorial. Unlike most network programming, HBO on Broadband won’t be streamed. The offering is, instead, tethered to its own computer application. Rather than using a web browser, viewers will have to install this new program and then download HBO’s shows to their hard drive. Other restrictions: the content is PC only, shows cannot be transferred to a portable device and they expire four weeks after being downloaded. The application can be programmed for up to five users and downloaded to five XP or Vista PC’s. An Apple application is planned but not yet ready.
Peter Stern, EVP of product management for Time Warner said, “We know there is some interest in watching video on the PC. Part of the goal is to determine the magnitude of that interest.”
Given the extent of the limitations, it seems unlikely that goal will be met by this experiment. HBO on Broadband is an offer tailor made to appeal to a limited audience. It’s handicapped from the start by the necessity to compromise with existing partners.
The Affiliate Roadblock:
It’s the nature of the beast: rebroadcasting cable-exclusive programming is a complex scenario. On the one hand channels like HBO and Showtime are fueled by subscription and that inherently limits their audience. An online offering gives them a marketing opportunity to reach new viewers and ,with pre-roll ads, could provide a new revenue stream too. Both of those developments are positives and desirable. On the other hand, there are these pesky distribution contracts.
Estimates put HBO’s revenues at more than $3.5b a year. A handsome portion of that income comes from cable and satellite affiliates (collective “cable co’s”) which pay HBO a per subscriber fee. That “per head” charge has been estimated to be about $6 to $7. (With multiple HBO channels often packaged in bundles, the fees are hard to pin down). Contracts defining how these deals work give the cable co’s the support of some protective covenants. An online offering threatens to undercut those affiliates, or at least, really make them unhappy.
HBO is caught in the middle. An online offering serves their interests, is even almost essential these days, but they can’t put a proper one together without scarring their big breadwinner: the cable co’s.
Late 2006 was a notable example. It was widely rumored that HBO had big plans to put their content online. There was buzz, and consumer demand. It seemed certain. It never happened. Concerns about affiliate relationships reportedly quashed it.
As a “Plan B,” last February, together with AOL, HBO launched an off the mark effort to create original, web exclusive content at a site called ThisJustIn.com. It was dreamed up to function as a test market for new concepts and to be a video portal. As a video solution, the attempt avoided the ire and wrath of the cable co’s by excluding all of the TV content. (No Sopranos, no Sex in the City, no Entourage). But without the A-List programs to lead into new material, the audience didn’t appear either. Ultimately, the comedy site proved unfunny. It was euthanized in August.
So now HBO’s back, trying again to wiggle out of an awkward spot. This time they’re putting some of their quality programming behind the project. But will it be enough?
A successful online video offering needs to be a lot of things but accessibility, portability and depth of content are all important. Here, software is required. That limits access. Here, it’s PC only. That limits portability. Forced to compromise, HBO on Broadband is starting out short on all three prerequisites.
HBO on Broadband will probably still find a small niche. There are plenty who will want to catch a missed episode and will be comfortable using it accordingly. But as a tool to study usage patterns, or a legitimate offering to satisfy subscriber demand; for those, it’s lacking.
Time Warner’s Wisconsin cable operator is expected to ship CD’s containing the application to qualifying subscribers later this month.