The TV industry is going through a massive architectural innovation led by several factors. HBO is one of many stakeholders in today\u2019s ecosystem. They is fighting incoming players who do not need to play by the rules of the current system, while still earning the majority of thier revenues from a large entrenched incumbent. HBO is speeding up the death of its main customer. I think that\u2019s a winning strategy.<\/p>\n
Architectural Innovation in TV<\/u><\/p>\n
The traditional model that includes a large cable provider who packages content from individual stations and then sells these bundles to costumers is being threatened. The decreasing cost of content has allowed more players to enter the market. The rise of connected devices and second screens has led to the creation of distribution channels outside the reach of the TV, such as Netflix or Youtube. Finally, the on-demand nature of programming has reduced the need for \u201cappointment\u201d television, something most cable networks rely on for big ad dollars. We now see consumers demanding a piecemeal solution to television as interest becomes more heterogeneous and content options are at an all-time high. Many of the new players offer very low monthly costs and sometimes even free models. The providers struggle to compete with the high price of their bundled packages.HBOs Challenge<\/u><\/p>\n
HBO is on this sinking ship. Typically sold as a key feature in premium packages HBOs largest revenue stream is the fee per subscriber that they are paid by the cable provider. New Competitors like Netflix can work directly with the consumer charging them only for the content that they want. However, HBO risks the cannibalization of its current revenue stream and souring the relationship with one of its few big customers.<\/p>\n
HBOs Approach<\/u><\/p>\n
HBO isn\u2019t wasting time plotting their next move. They are just making the move. HBO announced their HBONow service which allows customers to pay just 14.99 a month to access HBO content anywhere OnDemand. They are matching the customer\u2019s current behavior and establishing a direct relationship with the customer to better understand their needs. This allows them to compete head on with content without the barriers their former business model created for them.<\/p>\n
In order to appease the cable providers, they have also made HBO content free to all cable subscribers through HBOgo. The one restriction with HBOgo is that it is only available on smaller devices (phones and tablet). This retains some value for current cable customers who want an on demand multi-screen experience. However, this is the most clever part of the strategy. All of this content is delivered through HBOs site and experience. They are training the customer to interact directly with the product, like a Netflix, regardless whether they are paying HBO directly through HBONow or watching through a cable provider like HBOgo.<\/p>\n
Why This Strategy Can Win<\/u><\/p>\n
HBOs competitive advantage is in content, not in distribution. By freeing themselves from picking a winner in the distribution wars they can focus on what they do best. They are creating the ability to test business models by operating in a cable package world and a direct to consumer world simultaneously. Most importantly, HBO can use the Netflix model to extract more value from their current subscribers. Netflix has about half the worldwide subscribers as HBO but almost 20% more revenue1<\/sup>. This means that direct customer brings in more revenue than one through a cable provider. If HBO can use the large guaranteed subscriber fees from cable to finance the technological advancements needed to go to consumer it can use its brand, and catalog to carve out a niche in the new world of TV.<\/p>\n <\/p>\n HBO will win by jumping the sinking ship of Cable TV packages<\/p>\n","protected":false},"author":1326,"featured_media":0,"comment_status":"open","ping_status":"closed","template":"","categories":[1061],"class_list":["post-3074","hck-submission","type-hck-submission","status-publish","hentry","category-hbo"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/digital-winners-losers\/","yoast_head":"\n\n