[LINK] "HBO Teaches the Streaming Wannabes How to Make Big Money on Original Shows"
Kyle Stock's Bloomberg BusinessWeek article noting the success of HBO makes me wonder if HBO's model could be generalizable to cultural industries more generally.
HBO revenue increased 9 percent in the recent quarter, to $1.3 billion, according to an earnings report this morning from Time Warner (TWX). What’s more, HBO managed a 36 percent operating margin, which is no small accomplishment in a hit-driven business that requires such expensive employees as Matthew McConaughey, Woody Harrelson, and Julia Louis-Dreyfus.
[. . .]
It’s not so much that HBO’s hits have smaller budgets than most might think. After all, the network spent $8 million on one Game of Thrones episode. It’s just that its flops are relatively rare-though not unheard of. Girls generates plenty of cultural conversation, but only 670,000 viewers tuned in for its Season 3 finale in late March, down from 1.1 million who watched the first episode.
But even those smaller audience numbers are insulated a bit by the subscription model. HBO executives don’t have to worry about each installment striking a chord with advertisers, and seasons are kept short enough that the network isn’t compelled to pull the plug midseason on a subpar offering.
And the growing field of streaming services is still clamoring for HBO’s leftovers. So-called content revenue from old shows increased 13 percent in the recent quarter, a $24 million improvement. Time Warner believes that the more people who watch HBO shows on places other than the cable-TV channel, the more likely they are to become subscribers-a philosophy that has led to a hands-off approach to those borrowing HBO Go passwords from friends and family. ”We firmly believe that if you have great content, giving consumers control over where, when, and on what platform they watch it will drive increased consumption and value,” Bewkes said.
HBO revenue increased 9 percent in the recent quarter, to $1.3 billion, according to an earnings report this morning from Time Warner (TWX). What’s more, HBO managed a 36 percent operating margin, which is no small accomplishment in a hit-driven business that requires such expensive employees as Matthew McConaughey, Woody Harrelson, and Julia Louis-Dreyfus.
[. . .]
It’s not so much that HBO’s hits have smaller budgets than most might think. After all, the network spent $8 million on one Game of Thrones episode. It’s just that its flops are relatively rare-though not unheard of. Girls generates plenty of cultural conversation, but only 670,000 viewers tuned in for its Season 3 finale in late March, down from 1.1 million who watched the first episode.
But even those smaller audience numbers are insulated a bit by the subscription model. HBO executives don’t have to worry about each installment striking a chord with advertisers, and seasons are kept short enough that the network isn’t compelled to pull the plug midseason on a subpar offering.
And the growing field of streaming services is still clamoring for HBO’s leftovers. So-called content revenue from old shows increased 13 percent in the recent quarter, a $24 million improvement. Time Warner believes that the more people who watch HBO shows on places other than the cable-TV channel, the more likely they are to become subscribers-a philosophy that has led to a hands-off approach to those borrowing HBO Go passwords from friends and family. ”We firmly believe that if you have great content, giving consumers control over where, when, and on what platform they watch it will drive increased consumption and value,” Bewkes said.