IP Democracy: HBO to Offer Online Subscription Service?

Virtually all TV networks are rushing to stake their claims in the online video gold rush. From Fox to MTV to ESPN, programs that traditionally have been shown via the TV set are now available online. And while premium channels, such as Showtime, which has tinkered with releasing some shows (“Fat Actress” and “Barbershop”) online, and Starz, which sells a subscription online movie service called Vongo, have experimented with the web, the biggest pay channel of them all, HBO, has stayed away.

That’s about to change, according to Business Week’s Ron Grover, who reports that HBO is preparing to launch a web-based subscription service featuring its hit shows such as “The Wire,” “Deadwood” and “Big Love,” along with, presumably, its slate of post-theatrical Hollywood films.

The Time Warner-owned network supposedly also plans to allow these films to be transported to mobile devices. If HBO does indeed launch an online service, the cable industry (outside of Time Warner Cable, of course) is likely to, um, flip out, as Grover suggests.

Where a new HBO service gets sticky—and why it has taken so long to put together—is that a new broadband offering would put HBO into competition with the cable and satellite operators that now pay the bulk of the estimated $3.5 billion a year in revenues HBO generates. Those “affiliates” generally pay HBO around $6 a month for each of its nearly 30 million subscribers, according to cable industry analyst Kagan Research. The arrangement generated $863 million in cash flow last year.

So HBO would rather do any Web package with the help of the Comcasts of its world. “We’re examining various distribution [possibilities], including broadband platforms, but have yet to determine which is the best model for our business,” says the HBO spokesman. “We’re having conversations with cable affiliates as well as all of our distribution partners, and together we will explore all of our opportunities in that space.”

In the end, however, cable systems should calm down enough to realize that the Internet-based HBO won’t damage the TV-based HBO for a long time to come. And if HBO works with these cable operators to, perhaps, develop a two-fer offering — an HBO TV subscription with an add-on Internet service — everybody wins. While Starz hasn’t yet been able to attract any cable affiliates for its Vongo service, Starz isn’t HBO and doesn’t have its drawing power.

Posted by Cynthia Brumfield on November 2, 2006 11:42 AM to IP Democracy