HBO considering offering HBO GO w/o cable

[ChicosBailBonds]

Chicos,
Despite my monthly cable bill, you have me convinced this is a bad idea.  Is there a middle road option in any of this?  Other than the premium channels my cable company offers only 3 tiers.  Can then offer 6 to 10?  Or does that run into the same issue a la carte?
 

We've been trying...we opened up some new packages this past year.  Here's the problem, many channels require a minimum penetration level of eyeballs, especially the sports channels.  So if you add too many packages that don't include those core channels, you risk diluting the minimum pen rate requirements which are contractually required.  We would love to not have to carry certain sports channels in every tier, but we can't avoid it presently.  The sports channels need the dollars to pay the athletes so they demand huge subscription fees and the penetration to get advertising.

We've been aggressive not taking Pac 12 Network.  We currently aren't taking Comcast Houston.  These are the bets distributors are trying to take now to see if they do this, how many customers will they lose while fighting back against the pricing grab by the sports teams, but it comes at a cost.  If you are a Rockets fan, you are going to get someone that gives you the Rockets in that case. 

Many smart people trying to find a solution and they've been working on it for years.  If it was obvious, it would have happened.  Apple tried, and failed.  Intel is trying right now and they are running into major problems.

[Chicago_inferiority_complexes]

Consumers have demanded it...Canada is a test case and it's failing miserably.  Look, the distributors like us would LOVE to have this a la carte, our CEO preaches it all the time.  We would love to go to Viacom and say we will take MTV, and Nick and two other channels, but the other 7 you offer we don't want.  Guess what happens when we try this?  Viacom says you can have all 17 of our channels for $1 billion a year or you can have the four channels only you want for $999 million.  Which do you prefer?  As such, the distributors have to be able to recoup their costs so they have to bundle as well.  The content companies refuse to break up the channel costs, and I've explained many reasons why they refuse to do so.  ESPN needs the money to pay the NFL, NBA, college conferences.  AMC needs it for content development, just as Fox, Viacom, etc do.  Make it a la carte, and now the cost goes WAY up per channel, many channels disappear entirely because they are too niche (how is that going to fly with politicians when Black Entertainment goes away because of not enough subscribers...or Univision....or women's programming....etc, etc).

People don't understand what it means...it's a populist argument that people don't get.  People don't realize the pipeline of new shows dries up, even MORE commercials will be added to subsidize for the revenue lost, channels will go away entirely, choice reduced, and costs rise.  Sounds like a gov't idea to me.

McCain should retire.

I'll state again that I want no government part in any solution, so I hope we have that established.

I think this is going to happen whether content creators and distributors want it or not. Consumer just want it more and more, and eventually the financial incentive to do it will be too great to ignore. Eventually, too many people are going to want to see Game of Thrones without waiting for the DVD to come out or purchasing a package that carries HBO. I know I'm included in that group. I will absolutely grant you that that market may never expand. But I wouldn't be surprised to see it expand. And when it does, the entire existing TV infrastructure could collapse pretty quickly.

[Benny B]

Who is going to fund it Benny?  Who is going to fund the creation of the next big show with no built in audience and sustained revenue to allow it to happen in the first place?  This is what you guys continue to forget time and time again.  You look at it POST hit, not development of shows.  Most shows fail, but the revenues they can count on from these fees allows them to take risks to develop and create the shows to begin with.  Without those guaranteed revenues, there will be many fewer risks taken and those shows will not be made.  It's very simple.  You aren't going to see huge bets made on a show that can't have a guaranteed revenue stream or guaranteed audience, the math doesn't work.

So what you're saying is that HBO didn't have to pony up any dough to produce The Sopranos until after season 1 was aired and it was declared a massive hit.

Bless you, James Gandolfini for working for free that first year.

[ChicosBailBonds]

Let's think of it this way, because this is often the driver of costs.

When a NFL, NBA, NHL, or MLB player signs a multi-year contract are you paying him based on what he did or what he will do?  The money (with the exception of the NFL) is guaranteed whether he totally dumps or plays great, but the money is coming regardless of performance.  When a successful author signs to write some books, he is given a contract to produce X number of books.  A director of movies, same thing.  For many actors, same thing.  This is different than most industries.

To pay for this stuff, revenues (guaranteed revenues) are coming from somewhere.  To guarantee 5 year contracts for a baseball player they have to know what their revenues are going to be the next 5 years...the stable revenues.  Those come from television.  This is just one example, but where it all ties in.  The same goes for Walking Dead or anything else along those lines.  If a studio gets a hit with a show, their costs go up exponentially because the actors want more money, the producer, director, etc....so when they sign them to do X number of episodes over X number of seasons, they are doing this based on stable revenue sources.  They cannot operate their businesses without these known revenues.

This is why sports, entertainment, etc do not want a la carte pricing.  Of course the consumer does, but the consumer looks at it like every show is a hit, every series a home run, when the vast majority fail or never even get aired.  All those failures still cost a tremendous amount of money to make.  Without those "safety net" revenues in which to create content, there will be less content..a ton less.  Without guaranteed television revenues, there won't be sports contracts that are guaranteed (maybe that's a good thing, but good luck getting it changed).

[Chicago_inferiority_complexes]

I'm not sure why television "needs" to be different from every other industry.

If I want to buy a book from a particular publisher, I don't need to buy 9 crappy ones that I'm not interested in.

If I want to buy a salad at Panera, I don't need to buy their entire menu.

If I want to see a movie, I don't need to buy a slate of passes to half a dozen other movies that I'm not interested in.

If I want to buy a pair of jeans at Kohls, I don't need to buy eight other clothing items.

If a quality product exists, consumers will come. Same as every other industry. You find the money to support new projects either from your previous success or from VCs/bank loans/investors. Why would television be any different?

If consumers are already dumb enough to pay for full television packages, I guess I can see them continuing to shell out hundreds for satellite or Crime Warner, etc. As for myself, I'm in my late 20's and I can tell you that there will never be a moment in my life where I will purchase a standard television package as they exist today. Maybe the market for consumers like myself will never develop, maybe it will. Hard to tell.

[Hards Alumni]

I absolutely love reading this thread.

[reinko]

I'm not sure why television "needs" to be different from every other industry.

If I want to buy a book from a particular publisher, I don't need to buy 9 crappy ones that I'm not interested in.

If I want to buy a salad at Panera, I don't need to buy their entire menu.

If I want to see a movie, I don't need to buy a slate of passes to half a dozen other movies that I'm not interested in.

If I want to buy a pair of jeans at Kohls, I don't need to buy eight other clothing items.

If a quality product exists, consumers will come. Same as every other industry. You find the money to support new projects either from your previous success or from VCs/bank loans/investors. Why would television be any different?

If consumers are already dumb enough to pay for full television packages, I guess I can see them continuing to shell out hundreds for satellite or Crime Warner, etc. As for myself, I'm in my late 20's and I can tell you that there will never be a moment in my life where I will purchase a standard television package as they exist today. Maybe the market for consumers like myself will never develop, maybe it will. Hard to tell.

Well, I for one am pissed they don't offer a You Pick 3 or You Pick 1.  I find it criminal that if I order a You Pick 2, they force me to take two items!!! Sometimes I just one, or I want 3!

[Lennys Tap]

This is why sports, entertainment, etc do not want a la carte pricing.  Of course the consumer does, but the consumer looks at it like every show is a hit, every series a home run, when the vast majority fail or never even get aired.  All those failures still cost a tremendous amount of money to make.  Without those "safety net" revenues in which to create content, there will be less content..a ton less.  Without guaranteed television revenues, there won't be sports contracts that are guaranteed (maybe that's a good thing, but good luck getting it changed).

You're hilarious. We the consumer are not the rubes you think we are. We fully understand why TV content providers WANT their revenue guaranteed before (or whether) they produce anything worthwhile. They are crony capitalists/insider socialists (same difference) who want a free lunch - a rigged wheel. My advice to AMC? Find INVESTORS to help develop your content instead of asking for subsidies. How much content will we end up with? Exactly the amount that the market demands/wants. Defending these guys is no better than defending government subsidies for ethanol, Solyndra, etc., but I guess they're putting food on your table so that makes it OK.

[Chicago_inferiority_complexes]

How much content will we end up with? Exactly the amount that the market demands/wants.

+1 - All that really needs to be said.

[Canned Goods n Ammo]

You're hilarious. We the consumer are not the rubes you think we are. We fully understand why TV content providers WANT their revenue guaranteed before (or whether) they produce anything worthwhile. They are crony capitalists/insider socialists (same difference) who want a free lunch - a rigged wheel. My advice to AMC? Find INVESTORS to help develop your content instead of asking for subsidies. How much content will we end up with? Exactly the amount that the market demands/wants. Defending these guys is no better than defending government subsidies for ethanol, Solyndra, etc., but I guess they're putting food on your table so that makes it OK.

+1.

Chico's, you're a pretty political guy in other threads.

Everything you are saying here seems to go against your conservative viewpoint.

What's the deal?

[Strokin 3s]

You're hilarious. We the consumer are not the rubes you think we are. We fully understand why TV content providers WANT their revenue guaranteed before (or whether) they produce anything worthwhile. They are crony capitalists/insider socialists (same difference) who want a free lunch - a rigged wheel. My advice to AMC? Find INVESTORS to help develop your content instead of asking for subsidies. How much content will we end up with? Exactly the amount that the market demands/wants. Defending these guys is no better than defending government subsidies for ethanol, Solyndra, etc., but I guess they're putting food on your table so that makes it OK.

Sounds to me then the answer is who can come up with the best model, i.e.  we have a 20% success rate at producing hit television shows.  And we know that from that 20% we get X number of dollars which fund the other 80% of the content that goes down the crapper.  Question becomes who can identify and produce shows at a higher level than the competition and who allocates their money correctly, rather than throwing it at anything that moves and hoping it sticks.

[Chicago_inferiority_complexes]

Question becomes who can identify and produce shows at a higher level than the competition and who allocates their money correctly, rather than throwing it at anything that moves and hoping it sticks.

This is right. The difference between the current television format and pretty much any other industry that has greater competition is that there seems to be less of a connection between producing a quality product and a direct response by consumers. McDonald's comes up with a new great product and people will come to McDonald's for that. AMC comes up with Breaking Bad and people like me sit around, still not having cable, and waiting for the next DVD set to come out. If the number of people sitting around waiting for current television shows to become available grows, eventually the financial incentive to reach out to them will be too great to resist.

Imagine if McDonald's came out with a great new burger, but said that if I want to have it now I have to purchase a stamp book of 12 value meals, a couple of which contain the new burger... or I can wait 12 months after its debut to buy it individually!

[Coleman]

+1.

Chico's, you're a pretty political guy in other threads.

Everything you are saying here seems to go against your conservative viewpoint.

What's the deal?

The deal is he works in the TV industry. Pretty obvious.

[jesmu84]

Sounds to me then the answer is who can come up with the best model, i.e.  we have a 20% success rate at producing hit television shows.  And we know that from that 20% we get X number of dollars which fund the other 80% of the content that goes down the crapper.  Question becomes who can identify and produce shows at a higher level than the competition and who allocates their money correctly, rather than throwing it at anything that moves and hoping it sticks.

Isn't this basically exactly what movie studios do?

[Lennys Tap]

Isn't this basically exactly what movie studios do?

They produce content without subsidies or guarantees? And if they do a terrible job their investor base dries up and they go out of business? That's just plain mean.

[ChicosBailBonds]

So what you're saying is that HBO didn't have to pony up any dough to produce The Sopranos until after season 1 was aired and it was declared a massive hit.

Bless you, James Gandolfini for working for free that first year.

Nope, didn't say that but they are also the exception to the rule.  They are charging anywhere from $16 to $20 per month for their content.  I know them very well, I'm responsible for all their revenue here.  But Sopranos is hardly the only series they were having to pay for, many of which didn't do that well.  Take a look at HBO from 2008 to 2011 and how much they were struggling for viewership, subscriptions, etc.  Because of the backing they had with Time Warner at the time, they could get away with it.  Many other channels cannot and they will not create the content as a result.  The risk is too great. 

You should also note, however, that Sopranos cost so much at the end to make because of the demands of the actors, etc, it was one of the reasons they called an end to the show.  It ends up tapping so much on the cost side that they weren't able to effectively produce other shows for quite some time that could sustain the business.

[ChicosBailBonds]

I'm not sure why television "needs" to be different from every other industry.

If I want to buy a book from a particular publisher, I don't need to buy 9 crappy ones that I'm not interested in.

If I want to buy a salad at Panera, I don't need to buy their entire menu.

If I want to see a movie, I don't need to buy a slate of passes to half a dozen other movies that I'm not interested in.

If I want to buy a pair of jeans at Kohls, I don't need to buy eight other clothing items.

If a quality product exists, consumers will come. Same as every other industry. You find the money to support new projects either from your previous success or from VCs/bank loans/investors. Why would television be any different?

If consumers are already dumb enough to pay for full television packages, I guess I can see them continuing to shell out hundreds for satellite or Crime Warner, etc. As for myself, I'm in my late 20's and I can tell you that there will never be a moment in my life where I will purchase a standard television package as they exist today. Maybe the market for consumers like myself will never develop, maybe it will. Hard to tell.

Think about what you are saying.  Ridiculous examples.  The jeans are mass produced...it's a widget.  A television series is not mass produced, each show different, with different actors, sets, producers, writers, etc, etc.  The jeans are the same thing, same machines making them...it's a widget.  The salad is a widget. Your book example, actually you are paying more for certain books than others...why is that?  Because Tom Clancy or whomever is getting paid in advance to produce certain books and that cost is built into what you pay.  There's a reason why certain books are charged more than others, and isn't the page count. 

Like I said, you can go a la carte, and the ramifications will be huge....Canada is learning this right now with backlash as a result.  You'll pay a lot more for a lot less.  It's simple economics.  If you want to pay $20 for ESPN and $4 for Food Network, and $2 for DIY and $18 for HBO for a total of $44 for four channels...yup, you're saving money.  Or you can spend about $85 for 150.  Of course if you go with the former, many of those smaller, niche channels go bye bye.  The revenues for ESPN dry up, less money for the Marquette's of the world, etc.  It's simple economics. 

[ChicosBailBonds]

The deal is he works in the TV industry. Pretty obvious.

Actually, it's just common sense.  I don't know why people make it so hard.  These people don't work in the TV industry, and they are smart and figured it all out for themselves.  Give it a try.   

This is from very liberal slate magazine, to conservative Bloomberg.  It's COMMON SENSE and basic math.  If you studied any math principles at all or any economics, this is a no brainer.  Many of the articles here lay it out clearly.  Has nothing to do with what I do, I just choose not to ignore the math...it doesn't lie.

http://www.slate.com/articles/business/moneybox/2013/05/mccain_s_la_carte_cable_bill_is_bad_deal_for_consumers.html

http://variety.com/2013/biz/news/a-la-carte-tv-will-never-be-1200410243/

http://go.bloomberg.com/tech-blog/2013-01-31-your-cable-bills-going-up-again-but-forget-a-la-carte-pricing/

http://www.bloomberg.com/video/why-cable-la-carte-pricing-will-never-happen-RRn3sCquSfOrQmCsDG7XEQ.html

http://www.twcableuntangled.com/2011/06/a-good-argument-against-a-la-carte-pricing/

[ChicosBailBonds]

+1.

Chico's, you're a pretty political guy in other threads.

Everything you are saying here seems to go against your conservative viewpoint.

What's the deal?

I prefer the liberartian POV for most things, so get gov't out of the way.  Call that conservative or libertarian, I think it's the right play.  Now, saying that, yeah there is socialist principles in play here just as there are for many industries.  No such thing as a pure play and no such thing as a true free market.  The question there is how free is it going to be?  Hards will have one view that is a heck of a lot different than mine.

I've copied many articles here...it's Math 101....that's why it surprises me greatly that Lenny, who is mathematically competent as well economically versed, doesn't spend 5 minutes to educate himself and figure it all out. It's not hard, he's a smart guy but on this topic he actually does come across as a rube which is odd.  I had more faith in him.

[ChicosBailBonds]

Isn't this basically exactly what movie studios do?

Not anywhere close to the scale.  One TV show typically lasts 13 weeks for one hour per show, on average.  Now multiply that by all the hours of programming you need in a single day, multiplied by all the channels out there.  Far far far far far far far fewer movies are made than television shows.  Thus the hits for success or failure are far different.  Even saying that, think about how many movies go directly to DVD...you would be stunned.  TV and movies, different animal though the cross pollinate in some areas because of the medium, but the business model is different because the amount of content needed.

[Silkk the Shaka]

+1.

Chico's, you're a pretty political guy in other threads.

Everything you are saying here seems to go against your conservative viewpoint.

What's the deal?

Conservative idealist until it potentially affects him negatively in any way.  Fairly common.

[ChicosBailBonds]

Conservative idealist until it potentially affects him negatively in any way.  Fairly common.

LOL.

It doesn't effect me at all.  If you look at what I wrote, I would LOVE to sell this stuff a la carte.  Our CEO, CFO, pretty much every distributor is saying the same thing.  We would do it in a second.  I'm telling you why it won't happen...because of the content providers (Disney, Fox, Viacom, Discovery, etc, etc, etc).  I'm not against it, I'm telling you why they won't and some of it is legit, like creating content our securing sports fees. 


Maybe the IRS can fix it for us.

[jesmu84]

Far far far far far far far fewer movies are made than television shows. 

Hmm.. Maybe if you took into account every television station and every time slot available to them. But what about top 4/5 movie studios vs. top 4/5 watched TV stations? I'm betting the number of shows those TV stations (i'd assume it's Fox, ABC, CBS, NBC, ESPN.. just guessing) developed/started per year are pretty close to the total number of movies produced/developed per year of the movie studios.

And the "direct to DVD" amount is the equivalent of a 1 season or less TV show. And again, I'd assume there's more direct to DVD movies made (and the production cost higher) than TV series that bottom-out after a season.

[ChicosBailBonds]

Hmm.. Maybe if you took into account every television station and every time slot available to them. But what about top 4/5 movie studios vs. top 4/5 watched TV stations? I'm betting the number of shows those TV stations (i'd assume it's Fox, ABC, CBS, NBC, ESPN.. just guessing) developed/started per year are pretty close to the total number of movies produced/developed per year of the movie studios.

And the "direct to DVD" amount is the equivalent of a 1 season or less TV show. And again, I'd assume there's more direct to DVD movies made (and the production cost higher) than TV series that bottom-out after a season.

Even there it's an apples to oranges scenario because of the windowed releases.  Here's what I mean.

For a studio movie it has six life cycle ways it is monetized.

1) Released to the movie theatres (window 1)
2) After window 1, it is released to DVD (window 2)
3) Window 3 it is sold as pay per view or EST (electronic sell through) on services like Directv, Dish, Apple TV, Xbox, PS3, Netflix
4) Window 4 is the premium window and usually happens about 9 months to  24 months after window 1.  The premium window is when it appears on Starz or HBO or Epix or Showtime.  This is an exclusive window.
5) Window 5 comes after the Premium window is closed and it can then appear as library content (non-exclusive) where it might be on any number of premium plex channels
6) The last window is where broadcast or cable channels like FX, Fox Movie Channel, TNT, etc buy the rights to have it played with commercials...this is typically many years after Window 1

In each of these lifecycle stages, that product earns revenue.  Now, not all films hit all six.  Some go directly to window 2 and may stop at window 5.

For TV episodes, they are lucky if they can monetize past seasons on DVD or through Hulu \ Netflix, but it is much rarer.  This is why the TV side of the house has so much of a harder time with hits and misses.  They can focus test the heck out of the pilots, have all the research in the world and it can do great but 2 or 3 weeks in, bombs and that entire investment is gone.  This is why the studios won't be changing anything anytime soon in my opinion.

[jesmu84]

Even there it's an apples to oranges scenario because of the windowed releases.  Here's what I mean.

For a studio movie it has six life cycle ways it is monetized.

1) Released to the movie theatres (window 1)
2) After window 1, it is released to DVD (window 2)
3) Window 3 it is sold as pay per view or EST (electronic sell through) on services like Directv, Dish, Apple TV, Xbox, PS3, Netflix
4) Window 4 is the premium window and usually happens about 9 months to  24 months after window 1.  The premium window is when it appears on Starz or HBO or Epix or Showtime.  This is an exclusive window.
5) Window 5 comes after the Premium window is closed and it can then appear as library content (non-exclusive) where it might be on any number of premium plex channels
6) The last window is where broadcast or cable channels like FX, Fox Movie Channel, TNT, etc buy the rights to have it played with commercials...this is typically many years after Window 1

In each of these lifecycle stages, that product earns revenue.  Now, not all films hit all six.  Some go directly to window 2 and may stop at window 5.

For TV episodes, they are lucky if they can monetize past seasons on DVD or through Hulu \ Netflix, but it is much rarer.  This is why the TV side of the house has so much of a harder time with hits and misses.  They can focus test the heck out of the pilots, have all the research in the world and it can do great but 2 or 3 weeks in, bombs and that entire investment is gone.  This is why the studios won't be changing anything anytime soon in my opinion.

I understand what you are saying. And agree with this post.

However, my post was in response to yours saying that there are fewer movies released compared to TV shows. This current post of yours does nothing to refute mine. I believe that there are as many, if not more, movies released compared to TV shows. This current post of yours shows nothing to deny that.