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HBO Experiment Could Smooth The Way For A La Carte
7/31/2014

NEW YORK--It looks like consumer preference for a la carte programming purchases is slowly beginning to catch on with cable operators hoping to reduce subscriber churn and attract the growing number of "cord cutters" canceling either cable subscriptions for over-the-top (OTT) service like Netflix and Roku.

The $49-a-month Internet Plus package would include Web access, a limited number of TV channels and the HBO network.
Several media report have stated that Time Warner Cable will test a new program for its broadband-only customers to allow them access to HBO only via the Internet.

"There's no secret we're looking at all these distribution options," Quentin Schaffer, a spokesman for HBO, told Bloomberg. The news service said HBO generated $1.79 billion in operating profit last year (up 16 percent over 2103). Revenue increased 4 percent to $4.9 billion.

The $49-a-month Internet Plus package, similar to what Comcast offered a year ago, would include Web access, a limited number of TV channels and the HBO network. More than 10 million U.S. broadband customers don't subscribe to traditional cable TV.

Bloomberg said an Internet-based service could give HBO access to millions more potential viewers, especially outside the U.S., where pay TV penetration rates are much lower. In Europe, for example, about 40 percent of homes have a pay-TV subscription. By comparison, about 90 percent in the U.S. homes have cable TV, making the risk of cannibalization more profound for TV programmers considering online offerings.

"We are moving to a landscape where cable and pay-TV providers are trying to segment the market," Amy Yong, an analyst with Macquarie Securities USA Inc., in New York. said in an interview with Bloomberg. "There is a way to bundle with a broadband package but you have to be careful about not diluting the revenue of your average bill now."

Bloomberg reported that HBO and its sister channel Cinemax added 2 million subscribers in the U.S. last year, bringing their domestic total to 43 million. The two channels had about 127 million subscribers worldwide at year-end.

Editor's Note: Netflix, based in Los Gatos, Calif., said its quarterly profits rose 25 percent, with worldwide subscribers increasing by a third to 50.1 million.

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