HBO Now Goes With Apple for Now

After reportedly running into trouble signing up traditional pay-TV providers, HBO has now teamed up with Apple for the launch of its new "HBO Now" OTT video service.

The à la carte online package includes current and past seasons of all original Home Box Office Inc. (HBO) programming for a monthly fee of $14.99. HBO Now will be available exclusively on Apple Inc. (Nasdaq: AAPL) devices for three months starting in April. Subscribers who sign up in April will receive the first month of service for free.

HBO has been clear that it continues to talk with its conventional pay-TV partners about distributing HBO Now. So far, however, no other deals are on the table. Among the top cable companies, Charter Communications Inc. said it is "not commenting on HBO Now for the time being." Cox Communications Inc. released a slightly more detailed statement, revealing that, "We're talking to HBO to better understand the service they've announced, but our distribution agreements have not changed."

Other leading US pay-TV operators have not yet responded to inquiries.

The success of HBO Go is part of what's propelling HBO to unbundle its content from a traditional pay-TV subscription. However, the premium programmer is walking a fine line by introducing an online service that could draw revenue away from its vast roster of cable, telco and satellite TV providers. Those pay-TV operators are important HBO partners, and they would rather that HBO content not be available as a standalone competitive product. Although both HBO and its partners wish to maximize revenue from broadband-only subscribers, they also want to avoid cannibalizing their existing bundled video business. (See HBO Will Go OTT in 2015.)

A Cox spokesperson illustrated that delicate balance by stating that, "The overwhelming majority of our customers prefer to access video via digital cable bundles for convenience, service quality and the unmatched value. That said, our goal remains to provide customers the content they want on the platforms they choose."

Want to learn more about OTT video's implications for cable operators and other pay-TV providers? Then check out the agenda for our upcoming Cable Next-Gen Technologies & Strategies event, Tuesday, March 17, 2015, at The Cable Center in Denver.

Over the last several years, several cable companies have experimented by offering HBO in a slim package of cable channels, often paired with broadband service. Cox has a "Flex Watch" service tier delivering 50Mbit/s broadband with basic cable channels, HBO and Starz for "as low as $59" per month. Time Warner Cable Inc. (NYSE: TWC) offers "Starter TV" with HBO for $29.99 per month plus equipment costs. And Comcast Corp. (Nasdaq: CMCSA, CMCSK) sells an "Internet Plus" package with a basic cable channel line-up, access to HBO and Internet speeds up to 25 Mbit/s for $39.99 per month for the first year. (See Comcast Set to Bundle Broadband & HBO and Time Warner Shakes Up the Bundle.)

— Mari Silbey, special to Light Reading

COMMENTS Add Comment
nasimson 3/11/2015 | 10:23:19 AM
Re: Well, this should be interesting. Mobile screens surpassed TV screens a while back. Next milestone would be smart phones surpassing TV screens. Even further down the road will be tablet screens surpassing TV screens. OTT content is getting hotter and hotter. Interesting times ahead.
msilbey 3/11/2015 | 9:32:01 AM
Re: Well, this should be interesting. I think there's going to be a battle now among providers offering lower-end packages. My guess is that cable/telco/satellite still has the high-end TV packages wrapped up, and a significant population will still want that level of service. But once there's competition from OTTs offering skinnier bundles, cable will start diversifying too. 

As for HBO, it sounds like the company wanted to make use of Apple's marketing budget, and it's a good deal for both in the short term. Given that HBO reportedly had some trouble signing up cable partners for the new product, I imagine this deal was also a convenient way to poke at the MSOs.
gconnery 3/10/2015 | 6:36:40 PM
Well, this should be interesting. I assume we'll see XBox, Roku, and PS4 support for HBO Now soon enough.

Will the MLB-backed streaming break down during the initial episode of Game of Thrones this season, or hold up?

Is the Apple TV deal about exclusivity or simply to avoid running up the numbers too quickly for their service rollout?  Or perhaps to avoid angering their cable partners more than otherwise?

Will those cable partners pull back on the 'advertising' they do for HBO?  Or demand higher fees during the next round of negotiations?  Or raise customer prices?  Or will they respond competitively, like by Comcast signing off on PS4 support for HBO Go rather than look stupid when customers can get it elsewhere?

Will Comcast and others stop charging $20 a month for HBO in some locations?

Are HBO Go and HBO Now really identical, having access to ALL the same content?

Its going to be interesting.  Certainly with SlingTV and HBO Now as well as Netflix and Hulu Plus you've got a pretty compelling alternative to the traditional cable package.  Will big cable bring back caps to battle this?

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