HBO next year will cut the cord and sell its popular streaming video service HBO Go as a stand-alone product, as more Americans choose to watch the Web, not the TV.
Viewers longing to see “Game of Thrones,” “True Detective” and “Veep” will no longer have to pay big bucks for cable and satellite contracts. So, is this the end of pay TV as we know it?
“HBO and ESPN are the two main reasons why people have cable and satellite TV,” says Forrester analyst James McQuivey. “The whole industry has eyed them for years nervous that one day they would decide to do exactly what (HBO) said they’ll do in 2015. We don’t know until we see pricing and packaging how rapidly this will force a change in the way pay-TV operators work, but it will definitely force a change.”
Millions already have canceled pay-TV subscriptions — as many as 10 million U.S. households are broadband-only. About 45 percent of Americans stream TV shows at least once a month, according to research firm eMarketer. That number is expected to increase to 53 percent, or 175 million people, by 2018, it says.
Video streamers aren’t falling behind on entertainment. So-called “cord-cutters” watched about 100 hours of video per month during the first half of this year, estimates the Internet research firm Sandvine.
The trend accelerated as Netflix Inc.’s Internet video service expanded into original programming and bought the rights to show popular cable shows such as “Breaking Bad” and “American Horror Story.”
Netflix’s 36 million U.S. subscribers now watch about 100 minutes of Internet video each day, calculates BTIG Research analyst Rich Greenfield, based on Netflix disclosures about its customers’ overall viewership patterns. Netflix-watching accounts for about one-third of U.S. Internet traffic in the evening, according to Sandvine.
Inc., Yahoo Inc. and Google’s YouTube also offer Internet-only series as alternatives to pay TV.
“Internet TV is going to be everything in a couple years,” Netflix CEO Reed Hastings told analysts during a Wednesday review of his company’s third-quarter earnings.
Parris Lilly, 40, a network engineer for a software company in Temecula, Calif., currently pays $180 a month for Verizon’s FiOS bundle of Internet access, phone and cable TV service. But that could change when the new HBO option debuts. Lilly estimates that if he goes streaming-only he could slash his monthly bill by $100.
Jasmine Chan, 26, a marketing manager in Washington, D.C., said she and her boyfriend already use streaming services such as Hulu Plus and Amazon Prime. “With this announcement, we’ll probably be canceling our cable TV service and stick with just Internet.”
HBO has about 30.4 million subscribers according to research firm SNL Kagan. HBO CEO Richard Plepler said Wednesday that the network’s move is aimed at targeting the 80 million homes in the U.S. that do not have HBO but may want access to its content — and especially those broadband-only homes.
No pricing details were given, but Forrester’s McQuivey expects stand-alone HBO Go could cost about $15 a month. That’s more than the lowest payment option for Netflix, which starts at $9.
