HBO's Plepler: Less than 1% of HBO pay-TV subs have bolted for streaming service

HBO CEO Richard Plepler dismissed concerns that the company's new direct-to-consumer streaming service, HBO Now, is cannibalizing its core pay-TV product.

"We've seen less than 1 percent of HBO subs leave the bundle to get HBO Now," Plepler said to investment analysts at the second quarter earnings conference call for HBO's parent company, Time Warner Inc.

"Everything we are seeing, both from sampling and from subscriber satisfaction has exceeded our expectations," Plepler also said.

In October, when HBO originally announced the service, No. 2 pay-TV operator Comcast (NASDAQ: CMCSA) vocally objected, citing concerns of "cannibalization."

Time Warner executives did little to sate industry demand for metrics on HBO Now's subscriber level, estimated by MoffettNathanson last week to be between 970,000 to 1.9 million subscribers.

But as FierceOnlineVideo reported, the April launch of HBO Now more than offset the $21 million revenue increase experienced by HBO in the second quarter. Revenue for the premium programming service was up 1 percent to $1.44 billion.

"We're extremely pleased with how it's been received," said Time Warner CEO Jeff Bewkes. He added that HBO is "already investing in additional programming to support the service. You'll see additional announcements in the coming months."

One of those potential announcements could center around former ESPN personality Bill Simmons, who recently signed a wide-ranging, multi-year deal with HBO. Simmons, Bewkes said, "will be particularly appealing for consumers in an on-demand environment."

While seeking to minimize the impact of HBO Now on their core products, Time Warner executives did concede an appreciable amount of cord-cutting is occurring across networks.

"We've seen some modest [subscriber] declines in the U.S.," Turner Broadcasting CEO John Martin said during today's earnings call. "We have not seen any acceleration in the declines."

Turner Networks, however, was no worse for wear, reporting a 3 percent rise in quarterly revenue to $2.8 billion. Ratings-wise, TNT and TBS ranked as the Nos. 1 and 2 ad-supported cable networks among adults 18-49 during the periods.

Overall revenue for Time Warner was up 8 percent in the quarter to $7.3 billion.

Martin also noted that Turner isn't concerned about the "skinny bundling" programming strategy being employed by pay-TV operators, notably Verizon (NYSE: VZ), which restricts some niche programming to lower "add-on" tiers.

"We at Turner have the type of networks that will be overly represented in those bundles," Martin said. The lower price of these bundles, he added, "might have the ability to stabilize the overall unit trends and even return it to growth."

For more:
- visit this Time Warner Inc. investor relations page
- read this Hollywood Reporter story
- read this Deadline Hollywood story

Related articles:
HBO Now launch costs exceed network's $21M revenue rise in Q2
MoffettNathanson: HBO Now has as many as 1.9M subs, Sling TV has up to 200,000
Verizon latest to market HBO Now sans pay-TV subscription

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