HBO considers bypassing cable and selling programming directly to Internet viewers

A year ago, such an idea would have been considered unthinkable.
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In a sign of how fast the business of television is changing, HBO’s chief executive said he is now considering selling his premium service to Internet providers for customers who do not subscribe to cable.

In an interview last week with Reuters, HBO Chief Executive Richard Plepler said “maybe HBO GO, with our broadband partners, could evolve.” That could mean HBO would be the first premium cable network to bypass cable and sell its program slate directly to “cord cutters” on the Internet.

HBO GO was launched in 2010 to let cable and satellite subscribers view its programming over the Internet on devices such as Apple’s iPads. The service already has about 6.5 million registered users out of more than 100 million for HBO’s main cable service. Since HBO is one of the more expensive cable channels, most of its Internet viewers are now already spending in excessive of $100 a month for the service.

Plepler told Reuters that HBO GO could be packaged with a monthly Internet service, in partnership with broadband providers. It would cost viewers, he predicted, an extra $10 to $15 a month. “We would have to make the math work,” he added.

This is a major turnaround in thinking for HBO, owned by Time Warner. The network currently relies on financial support from its cable and satellite TV partners to help distribute and promote its shows.

In January, Plepler said it would not make business sense to provide an Internet-only product that circumvents its existing distribution network.

Yet, Internet-only rivals such as Netflix and Amazon are challenging the pay television business model by delivering original programming directly over the Internet. “Cord cutters” are abandoning much higher priced cable companies in droves.

Not only is alternative programming moving to the Internet, but Netflix and Amazon have begun producing their own original content. Netflix recently found success with House of Cards, a political thriller starring Kevin Spacey and produced by director David Fincher. It offers the same level of quality viewers see with HBO’s own programming.

Earlier this year, HBO updated its iOS HBO Go app to allow users to stream content to their Apple TV via AirPlay. A native HBO Go application for the Apple TV is rumored to arrive at some point this year.

Although Plepler announced no definite new plan in his Reuters interview, his mere suggestion of a change to Internet distribution was a major new development guaranteed to shake at the foundations of the cable television business.