HBO is Cutting the Cable

HBO is cutting the cable

The paradigm shift continues. Big news today in the TV world. HBO announced today that in 2015 they will offer an online only service that won’t require the subscriber to have a cable or satellite account.

This sounds like no big deal but really, this is pretty big news. The TV world is changing. Netflix got the ball rolling and now HBO is firing another shot against the cable and satellite companies.

As it stands currently, to get HBO, you need to have a subscription to a cable or satellite provider. You cannot access HBO programming in any other way. Even with HBO GO, you need to verify that you have an account before you are allowed to access HBO programming.

The cable and satellite companies want to keep it that way. Why? Right now, it costs on average, about $16 a month for anyone who wants to add HBO to their service. HBO collects about $8 of that subscription fee and the cable or satellite provider gets the rest. That’s a big pay day for providers to just carry the HBO signal.

In 2015, people will no longer need to have a subscription to get HBO GO. They will be able to get it directly from HBO cutting out the middle man. The cost is not yet known but will probably be somewhere in the neighborhood of the $8 per month that HBO is already collecting. Instead of allowing cable and satellite providers to make big money off HBO programming though, it will all go right to HBO and the consumer wins.

This is the continuation of the paradigm shift that is happening today in TV. We are going to see the decoupling of premium TV programming from cable and satellite providers. TV studios like HBO will cut out the middle man and go straight to the consumer to offer their product. Starting next year, you can cancel your HBO subscription through your current provider and get it right from HBO. Think if the others do this as well. What would it be like to actually pick and choose which channels you want instead of being offered packages of channels that has the one you want along with 50 you don’t want?

Take a non-premium channel like ESPN. They are the most expensive of all the channels on TV other than the premium studios. ESPN currently charges cable and satellite providers $5.54 per subscriber. That’s what they charge to DirectTV or Time Warner. Those guys charge you even more then for the right to have ESPN in your channel package. What if you could go right to ESPN and just pay them the $5.54? What if you don’t even want ESPN? I bet you have it right now because that channel, whether you want it or not, tends to get tiered with other popular channels that providers know you want so they can up your cable bill. You might not want ESPN but if you want Life Time, you are going to have to take ESPN too.

The change in the game that HBO is getting started is going to have wide-ranging impacts on the TV world. You are going to see an increase in competition because networks are going to want to follow HBO’s lead but they will actually have to provide compelling programming to make you want to order their service. Right now, just about zero of us would pay a separate fee to watch The CW but that might not always be the case. Those networks who will adapt to the new paradigm will do well, those who don’t are going to go the way of the DuMont Network (look it up).

You are watching a shift in the entertainment world that hasn’t been seen since the invention of cable TV. Just like cable changed the entertainment world, this news today from HBO is going to change things on the same scale. I am looking forward to seeing what happens.

HBO is cutting the cable