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HBO’s New Streaming Service Threatens Cable

ARIEL: Distributors worry that services like this will lead more people to cancel their cable subscriptions. Hanna Klingberg reports.


HBO Now, is starting as a partnership between HBO and Apple Computer. Because for the first three months, it will only be accessible through an Apple device. It’s for people like Ronnie Smith. She was a cord-cutter. That’s what the industry calls people who have cancelled their cable subscriptions in favor of online streaming services. But she decided she couldn’t do without HBO.

SMITH: That’s why I got cable! We were fine with Netflix and Hulu and Crackle and all those other apps, and then we needed cable to watch Game of Thrones.

Smith and 18 million other people watched every episode of Game of Thrones last season. That includes 1.5 million who downloaded the show without HBO’s permission. In the past HBO hasn’t launched a stand-alone streaming service. Because it  wanted the average $16 a month viewers paid to subscribe and didn’t think people would pay that much for a streaming service. The only way people like Smith could get HBO, was through a bundle – that’s what the cable companies call the hundreds of channels you get in basic cable – so that you can get HBO. That bundle costs $90 a month on average. HBO’s new streaming service is available for $15. If she gets it, Smith can cut the cord once more.

SMITH: Sure. Is it available now? We’ll do it. 

But HBO Now will cost almost twice as much as Netflix and Hulu Plus, which are $8 each. Media analyst Bishop Cheen from market research firm SNL Kagan thinks the service won’t cause more cord-cutting, but not because of the price. He says there’s something to be said for the paradox of choice. It’s a psychological principle used by economists that says while  people love having a lot of choices; at some point they have too many. Like too many streaming services.

CHEEN: Even millennials discover like, you know what, this is a lot of work. And I’m not getting all the stuff I really want. The prices are adding up.

DIXON: I disagree with him that it’s too much work.

Colin Dixon is a media analyst for nScreenMedia. He thinks HBO Now will push more people to cut the cord.

DIXON: Particularly for younger people. They’re perfectly happy, and frankly, I’m perfectly happy managing ten-twenty apps on my cell-phone. You think I can’t manage ten subscriptions with content providers?

This isn’t just a different way of doing business for HBO. It’s a different way of doing business for the cable companies too.

Professor Sam Craig of NYU’s Business School says they aren’t going anywhere. Because cable companies offer something consumers need

4:40 CRAIG: and that’s a broadband pipe into the home.

Cord-cutters may not save as much as they hope. Because if cable providers no longer make money off television, they’ll raise the price of broadband.

6:22 CRAIG: I think you already see that if you look at the pricing

7:23 CRAIG: and increasingly we’re gonna see that as the landscape changes.

Craig says Companies have to find ways to satisfy their customers and still make a profit.

14:42 CRAIG: It all goes back to what the consumer wants, and right now they wanna consume their content when, where and how they want it and not have it dictated by someone else.

HBO says the service will be ready in time for the season premiere of Game of Thrones on April 12.

Hanna Klingberg, Columbia Radio News.


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