Is HBO Now Making Comcast A Bit Nervous?

Originally published at tdgresearch.com on March 12, 2015.

HBO’s new standalone offering, HBO Now, will not be a competitive issue for most of its MVPD partners, with one very significant exception: Comcast. That’s because Comcast wants its customers to use its X1 and X2 set top boxes while other MVPDs would happily shift to a BYOD system.

Pay-TV subscribers with HBO Go have the best of both worlds: HBO live via their set-top boxes, and on-demand via a beautifully designed second-screen app that offers more or less immediate access to shows as they air, along with a robust catalog for binge viewing. It’s available on a full range of both mobile and in-home connected devices at no extra charge.

So why should Comcast be concerned?

Most MVPDs want the STB to go away. They are dated, difficult (if not impossible) to update, unreliable, and the primary reason so many people complain about their pay-TV operator. Worse still, an MVPD spends $200 or more to roll a truck every time the STB goes on the fritz or when a new box needs to be installed. Installers are unreliable, customers get angry, and the MVPD ends up looking bad –- it’s a no-win proposition for the operator and mess-in-waiting for the subscriber.

That’s why the idea of BYOD (Bring Your Own Device) has been so appealing. The MVPDs would love to see subscribers buy their own Apple TV, Roku, or Amazon Fire TV and simply provide an app. Or the operator could sell a branded device, but make installation and maintenance the consumer’s responsibility. Either way, this would take the onus to provide STBs off of the operator, allow them to push out more frequent updates, continually modernize their interfaces, and let customers feel as if they are in control –- all positives for operators who routinely rank as America’s least favorite companies.

But not Comcast.

Comcast wants to control the interface for everything, preferably using its X1 and X2 set-top boxes. It wants to create a standard for the industry and sell X1 and X2 to its peers, creating a Comcast-centric universe that gives it control over the box and all the data that comes with it. If need be, the STB can also incorporate streaming services like Netflix and Amazon (having to constantly switch inputs to watch those services is a key consumer pain point), though it will undoubtedly remain the center of a tightly-controlled universe that Comcast has to manage and maintain.

Overall, the MVPDs need not be overly worried about their current HBO-subscribing customers defecting. Remember, HBO is rarely a freestanding add-on these days, but part of a Jenga-like construct where, if you pull out HBO, the entire Titanium Triple Play package comes crashing down.

That means it’s more difficult to drop only HBO — you may end up losing Showtime as well, and perhaps a bit of Internet speed. Such is the nature of today’s bundle. MVPDs have a host of other levers they can adjust to keep HBO customers, as well. For example, they can lower the price of a package, add another 10MB of Internet speed for free, or give out two free years of HBO upon renewal. The possibilities are endless.

Since most MVPD customers won’t be very intrigued by HBO Now (HBO GO being a suitable service extension for MVPD HBO subscribers), HBO’s audience for Now is limited to Cord Nevers and Cutters, people who’d enjoy access to HBO’s programming but don’t currently have a (legal) way to access it.

Two things I’ll be focused on during the next few months: HBO Now’s impact on (a) Showtime’s subscription numbers (HBO and SHO are often bundled together), and (b) Roku’s sales numbers, since HBO Now will initially only be available on the newly-discounted ($69) Apple TV. Will the HBO Now deal revive the fortunes of the moribund Apple TV, which was steadily losing market- and mind-share to Roku?