Signaling a sea change in pay-TV distribution, a major programming supplier, HBO, has announced plans to break off from the cable bundle and distribute its shows to consumers in an a la carte streaming product.
"We will go beyond the wall and launch a stand-alone over-the-top service with the potential to produce hundreds of millions of dollars in revenue," HBO chief Richard Plepler told investors in his network's parent company, Time Warner Inc., in a Tuesday morning event. "The international revenue possibilities could be just as large if not larger [with OTT]. We have a huge opportunity in front of us. We will use all means at our disposal to go after it."
The standalone HBO product is set to launch in 2015, the executive said.
"This will be transformative for our company," Plepler said. Noting that there are now about 10 million households in the U.S. that are broadband-only, he added, "It is time to remove all barriers to those who want HBO."
With SVOD service Netflix emerging as HBO's key rival on a global scale, and significantly outpacing HBO in terms of subscriber growth, media analysts had been clamoring for HBO to go over-the-top for several years.
HBO has been one of pay-TV's most successful products for decades, generating $4.9 billion in revenue for Time Warner in 2013.
The move will undoubtedly displease pay-TV's biggest operators, with HBO must-see premium cable programming being one of the industry's key leverage tools, beyond live sports, in terms of keeping customers.
But HBO is probably powerful enough to endure the blowback. And chief executive Jeff Bewkes and the Time Warner Inc. board are under pressure to look for growth opportunities after rejecting an $80 billion acquisition overture from 21st Century Fox over the summer.
Plepler did not disclose how much the new service cost each month.
HBO has already distributed its "Go" product as a standalone offering in foreign regions like Norway. At this point, it has more than twice as many customers as Netflix--around 114 million vs. just over 50 million as of Q2 earnings reports--but Netflix is growing its subscriber base much faster as a standalone product.
For more:
- see this HBO release
- read this Variety story
- read this Re/code story
- read this Ad Age story
Related links:
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