HBO Leaves in the Middle Man

HBO just can’t quit the bundle. With HBO Now, its new, over-the-top streaming service, the network for the first time is making its content available to stream without a pay-TV subscription. But HBO still hopes to sell it as part of a bundle. The only differences are the the other components of the bundle and the identity of the bundlers.

At launch, HBO Now will be sold exclusively by Apple and available on Apple devices only. According to HBO’s FAQ, “you can subscribe to HBO NOW using your iTunes account. Customers can access HBO NOW by going to, through AppleTV® or by downloading the HBO NOW app in the Apple App Store®.” Apple and HBO will then share customer support duties.

HBO_NowAfter a three-month Apple exclusive, HBO will make the service available to other digital distributors, such as Amazon and Roku, presumably on terms similar to Apple’s, with the distributor doing most of the heavy sales lifting. But the network is also very much hoping to persuade its current cable-operator affiliates to bundle HBO Now with their broadband-only offering, so far with little success.

““This is not binary. This is multilateral,” HBO CEO Richard Plepler insisted to Re/Code’s Peter Kafka. “Nobody is doing us any favors launching an HBO Now over-the-top product in their broadband-only services but [is] instead choosing to enhance their own business…we’re trying to make the logical argument that this is an additive proposition.”

For all intents and purposes, in other words, HBO Now is being positioned as a traditional pay-TV network, to be bundled and sold by the operator, rather than as a purely OTT play.

The approach makes eminent sense from HBO’s point of view. The network has never sold direct to consumer before and has no expertise or infrastructure in place to handle retail sales and consumer-facing CRM. But it also explains why cable ISPs have been reluctant to sign on so far.

For cable operators, the beauty of broadband is that it’s becoming the preferred pipe for the delivery of programming but carries none of the content costs that are gradually destroying their margins on the pay-TV side of their business. Unlike in the cable TV business, the cost of OTT content is borne entirely by the consumer, leaving the service provider with much fatter margins at a similar ARPU.

The last thing cable operators want is to recreate the low-margin pay-TV business model on their high-margin broadband platforms. Bundling content with delivery would be a major step down that very rocky round.

As I’ve argued before, one unspoken reason Comcast, Verizon and other large ISPs from the pay-TV business have tried to establish a sender-pays interconnection policy with Netflix and other major OTT providers is forestall the day when content providers demand payment from ISPs for “carriage” of their programming, just as they do in the pay-TV business.

Whatever HBO’s internal reasons for offering HBO Now as a bundled product for broadband providers, those service providers have their own good reasons to want to avoid becoming middlemen again.