Moments before Apple’s glitzy announcement last Monday (March 9) of its high-tech Apple Watch, HBO chairman and CEO Richard Plepler took the mammoth stage at the Yerba Buena Center in San Francisco to confirm what many in the crowd already knew: The HBO Now standalone over-the-top service would roll out through Apple TV and other Apple-based devices next month.
HBO, which helped usher in the era of TV everywhere with the 2010 debut of HBO Go, now stands at the precipice of what could be a mass migration of cable networks offering their own over-the-top services directly to consumers. As cable operators and other multichannel video programming distributors continue to bleed traditional video customers, the bold move sparked some legitimate concerns that the service would cannibalize the premium channel’s subscribers.
Days after he left the stage to let the pundits chew on his plans, Plepler spoke with Multichannel News editor in chief Mark Robichaux and programming editor R. Thomas Umstead about the value proposition of HBO Now to both potential subscribers and the premium network’s existing distribution partners.
MCN: Have you been satisfied with the feedback that you’ve received for HBO Now launching on Apple TV in April?
Richard Plepler: I think we’ve gotten a lot of great feedback. I’ve said over and over again there is such an opportunity out there to grow our business in multilateral ways with our partners and with Apple and eventually with new partners. But I don’t think that this in any way interferes with the exciting avenues that we can go down together with our current partners.
And when you look at the opportunity before us — which is reaching millions of homes who currently can’t get HBO — and you say to yourself, “Wow, this presents an opportunity for our distributors to package HBO Now and to sell it to their broadband-only consumers,” why is that not a win for the consumer, a win for our partners and a win for us? No one has been able to explain to me why that isn’t so.
MCN: Cable operators are nervous about HBO Now. They are looking at a declining video business. What do you say to them?
RP: First of all, I go to our data which is pretty unequivocal: 97% of people who have HBO are not leaving the bundle and they’re not cord-shaving. So one of the best inoculations if you are a distributor that you can have is to have HBO in your bundles — low cost, triple-play … that’s No. 1.
No. 2, I think when you get HBO into a broadband-only package or a low-cost video package, you have a much greater chance of upgrading that consumer, because people with HBO inside their bundles are very happy customers. And as people come to see the user-friendliness of HBO Now and they come to really appreciate the versatility of the product, you’re turbo-charging the value of the subscription.
No. 3, most people really prefer a video bundle. They want it affordably priced, they love having HBO in it, but that’s their preference. If we can work together to expand those packages and also to offer to the 10 or 11 million broadband-only homes, who may never be subscribers anyway, a stickier version of that broadband-only product, it’s a win for the consumer, a win for our partners and a win for HBO.
MCN: How much of what we know as traditional cable programming is going to go to this form of direct-to-consumer delivery?
RP: This is not a binary dynamic, it’s a multilateral dynamic, and the key is to have great content and great brands to go where the customer is going and to give the customer optionality to enjoy your content where, how and when they want and to do it in a fair value package. And what we’re saying to our partners is I think it’s pretty axiomatic that our content is terrific, so use us to grow. Everybody needs to be dexterous. We need to be dexterous and our partners need to be dexterous.
MCN: Is there a reason why there isn’t a live HBO feed as part of the HBO Now service? Will there be at some point down the line?
RP: We’re working toward that technologically and we’re working to get that up as quickly as we can onto the product.
MCN: What’s your expectation for subscribers in the first year?
RP: We don’t have any great visibility into the first year and I would tell you this — this decision was not made to affect 2015 revenues. This was a strategic decision made in the long-term interests of our network so that we had maximum flexibility, maximum optionality going forward. We’re looking to the future.
