Let the Cord-Cutting Begin
Last week, premium cable network HBO announced their streaming service, HBO Go, will be available without a cable subscription in 2015. This inevitability stems from competitors such as Netflix and the rise of “cord cutters,” people who are eliminating their cable bills and opting into other streaming services, such as Hulu and Amazon Prime Instant Video.
Let’s face it: how many of us would pay for cable without HBO and ESPN? Trends toward cord-cutting is staggering. Analysts have estimated there are 10 million broadband-only U.S. households, and Netflix has reported approximately 40 million customers U.S. customers. HBO Chairman and CEO Richard Plepler recently stated at an investor presentation, “there are 80 million homes that do not have HBO and we will use all means at our disposal to go after them.”
The majority of HBO’s revenue is derived from partnerships with cable providers, but this announcement provides an opportunity for different programs online, preventing cannibalization of its primary business, which is quite lucrative. But with the success of shows such as Orange is the New Black and House of Cards, Netflix has been building original content to become a more direct competitor to HBO.
It’s widely reported that piracy is a major issue for HBO. Case in point? The “Red Wedding” episode of Game of Thrones was downloaded over 1.5 million times in one day. Sites such as Take My Money HBO have emerged, with more than 160,000 people requesting to pay for a streaming-only option. There is demand and this will signal additional cord-cutters as soon as this option is made available. I expect several more networks to follow, as CBS did with the announcement of its new streaming service–CBS All Access.
Honestly, I’m surprised HBO didn’t make this move sooner. This does signal an exciting opportunity for content producers, with more outlets seeking original content for the small screen. Streaming providers will seek and acquire additional content to remain competitive. While HBO Go may stream online at a targeted $12-$15 price point, there isn’t conclusive evidence this will signal HBO to completely abandon the cable networks and licensing agreements.
What this does represent, however, is a key catalyst in the unbundling of the cable business model. It will be interesting to see how competitors, such as Showtime and Starz, react to this news, as well for burgeoning Internet-only providers searching for a sustainable business model. Content is king, and I don’t see many people subscribing to more than two networks, so the arms race for original content may have just begun in earnest.
YOUR TURN: Do you plan to cut the cord? Let us know in the comments!
About Emile Cambry Jr.
Emile Cambry Jr. is the founder and CEO of BLUE1647, a technology and entrepreneurship incubator focused on professional development, workforce development, and business acceleration. Emile was recognized as Crains Chicago Tech 50 in 2014 and was appointed to the first-ever Technology Diversity Council for the City of Chicago and is the STEM Chairman to the 2nd District of Illinois.