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Cord Cutters and Time Shifters v. The Rest of the Country

By Alyssa Rosenberg on June 7, 2012 at 11:37 am

"Cord Cutters and Time Shifters v. The Rest of the Country"

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I was on the train and cut off from internet access yesterday, social media blew up over a site that let people enter in how much they’d pay per month for stand-alone HBO GO. It was a recapitulation of a debate we’ve had here before, about however much people would like to have standalone HBO GO, it’s a move that would fundamentally blow up HBO’s business model, and that HBO can’t approach quickly or lightly given its current commitments to cable companies and the scope of the programing it’s invested in. But the experiment also demonstrated one of the core difficulties in this debate: the fact that the people who talk most about wanting options that would allow them to watch television differently are a vocal minority whose behavior differs from much of the rest of the country in ways they don’t always seem to recognize or acknowledge.

One of the things this experiment exposed is that subscribers aren’t willing to pay enough for stand-alone HBO GO to support HBO’s current programming investments. As Sarah Pavis pointed out at BuzzFeed, people who submitted their quotes to the site ended up producing an average price of $12, lower than many current HBO subscriptions. We’ve discussed this before, but the current HBO price is feasible both because it’s essentially a volume discount, and because the cable companies cover their administrative and customer service costs. What this experiment tells HBO is not that there’s a lot of money for grabs out there, but that if it blows up its business models and its relationships with the cable companies who could cut them off if they offered a stand-alone option, their replacement customers would want to pay less for service than the current ones do. It’s true that HBO wouldn’t be splitting those fees with distributors, but it would have to take on a whole new range of expenses, including administration and some promotion, in the absence of cable support.

And it’s not just that folks are mistaking their preferences for a profitable business model. Josef Adalian at Vulture highlighted this piece from the Economist from last summer, in which HBO estimated that while there are 77 million households that have committed to buying cable but aren’t subscribed to HBO, there are only 3 million households that have broadband but not cable, and that fall into HBO’s target income bracket. Far more subscribers are invested in cable’s basic model, but are yet to be convinced by HBO’s specific product than there are consumers who only want HBO on the condition that HBO move away from the model that’s allowed it to make gorgeous, intellectually rich programming.

In Business Insider today, an industry analyst points out another emerging trend that may have been analyzed out of proportion to its actual adoption: time-shifted viewing of television. 83 percent of television viewing, according to the piece, still happens in the time slot in which an episode airs.

Taken together, these two sets of information are a salient reminder that as frustrated as some people are with the current model of television distribution, and as much as some vocal subset of people are changing their habits, television as it stands is a model that an awful lot of people are happy with. That doesn’t mean that they’ll remain happy with it, or that their viewing and consumption habits won’t change. But it does suggest we may still be a ways out from the point where it makes sense for a network like HBO to blow up the existing model, suffer through several rough years with a clear light visible at the end of the tunnel.

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