The HBO No-Go: Cable TV Versus The 21st Century
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Netflix's popularity is undeniable. I mean, when was the last time "HBO" was used as a verb? (Netflix)
Correlation does not equal causation, and the study is not without flaws: the study (like most) aimed to extrapolate data based on 7,500 survey respondents in households with Internet access, skewed toward American viewers who are 13 and older. These survey respondents were not asked whether they canceled subscriptions to premium cable if they were VOD users, or if their Netflix or Hulu Plus subscriptions were additional services alongside their other subscriptions.
Cable companies who were purported to be in decline based off the study (Starz, Showtime, HBO, for the most part) disputed the study; Showtime released viewing figures indicating that their viewership has increased over the past six years.
Still, as both a consumer and a participant of the constantly emerging digital culture, I have to wonder whether HBO and similar subscription-based cable channels are making the right decision in competing against, rather than working with, their VOD counterparts.
HBO, while first created in the 1970s, hit its stride in the late 1990s with the introduction of "The Sopranos" onto the television landscape. Its brand is one known for excellence in original broadcasting, in television series, documentaries and films. This prestige drew subscribers, and allowed for the channel to continue producing exemplary content. But in an age where 34% of Millennials (that is, those coming "of age" after the year 2000: the valuable 18-34 demographic) prefer to watch online video instead of broadcast TV, brand is starting to mean less and less.
Brand loyalty is important, but it doesn't hold the same weight that it used to. Even viewers who religiously follow certain cable shows ("Homeland" or "Game of Thrones," for example) will sometimes cancel their cable subscriptions sat the end of their show's season. And for the online market, offering services such as HBO Go has proved less than satisfactory for those viewers who helped make "Game of Thrones" the most pirated television show of 2012. Meanwhile, Netflix subscriptions rose 24% between 2012 and 2013, and has more than 40 million subscribers total.
HBO Go also suffers in the face of consumer choice. Even for those who are interested in (legally) watching television online, they have to choose between services, and cable-run VOD services don't stack up to Netflix. Content is key, and Netflix has more content than the exclusive HBO Go or Showtime On Demand, and has produced legitimately good original programs (with Emmy wins to add to the prestige). When quality matches up, the choice comes down to quantity, and if consumers have a limited amount of money to spend, all things being equal, they're going to go with the one that has the most bang for their buck. And if their buck doesn't cover what they're looking for, then they may turn to less…preferred methods of accessing their desired content.
This solution is still faulty. If cable channels were to remove their VOD services and sell content to Netflix and similar companies, they could ultimately end up creating an oligopoly in which a handful of powerful VOD companies will dominate the market. The desire for competition on an open market is admirable, although perhaps idealized in an entertainment industry run by six major studios. If HBO and Showtime pull their services, perhaps the VOD industry will become just as skewed as the industry it was born from.
Ultimately, the findings in the NPD research report are irraelevant, as are the refutations made by these cable companies. Neither report nor response analyzes causation; they do not analyze consumer choice, but instead focus on viewing numbers. The 34% of Millennials who favor online video to broadcast television will increase in number, and a breadth of service is more appealing than favoring brand prestige. And while the potential creation of an oligopoly is a risk (if not a foregone conclusion, at this point), HBO and its peers are seemingly less viable contenders on the VOD stage with each passing day.
Should cable subscription providers broach an agreement with these online platforms, such as Netflix or Hulu Plus, both ends of the contract have the potential to benefit. After all, if HBO or Showtime were to sell their highly-coveted programs at high flat rates, they have the potential to see a higher profit margin, rather than suffering to online piracy in such an extraordinary way. And Netflix gets the benefit of boasting more and more sought-after content, thereby drawing in more and more subscribers.
Staff reporter Christine Bancroft can be reached here or found on Twitter here.
