Plepler’s statement marks a sea-change in the pay-TV business. As is the case with any change of that magnitude, it might be easier said than done. Time Warner, Walt Disney Co. (NYSE: DIS) and other pay-TV networks have been well-compensated by cable and satellite operators for their original programming. Unless Plepler can convince the likes of Comcast Corp. (NASDAQ: CMCSA) and its presumed partner Time Warner Cable Inc. (NYSE: TWC), as well as Charter Communications Inc. (NASDAQ: CHTR), Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T) and its presumed partner DirecTV (NASDAQ: DTV), that this will not cannibalize the pay-TV business, it is difficult to imagine how HBO can pull this off.
ALSO READ: How Americans Watch Video
HBO generated nearly $5 billion in revenues in 2013 by licensing its programming to pay-TV providers that then bundle the programming into a package with dozens or hundreds of other channels and sell those bundles to consumers. The cable and satellite providers have resisted breaking out the more popular networks, like HBO and Disney’s ESPN, in what’s called an “a la carte” offering, but that is exactly what HBO is now saying it will do on its own. The company already offers a service for subscribers called HBO Go that allows them to view HBO programming on other devices.
According to Plepler, there are 10 million U.S. households that pay for only broadband access to the Internet and do not shell out for pay TV. There are 80 million households that do not subscribe to HBO. He sees this as an opportunity: “That is a large and growing opportunity that should no longer be left untapped. It is time to remove all barriers to those who want HBO.”
HBO could partner with one of the current over-the-top streaming services like Netflix Inc. (NASDAQ: NFLX) or Amazon.com Inc.’s (NASDAQ: AMZN) Amazon Instant Video. That option could keep HBO’s current cable partners in line. Even more dangerous from the pay-TV operators’ point of view would be Apple Inc. (NASDAQ: AAPL) or Google Inc. (NASDAQ: GOOG), both of which have very substantial war chests, and if HBO is seeking a partner that could make up some of the revenue that might be lost from the pay-TV providers, these two would be at the top of any list.
Netflix shares got slaughtered following reports of HBO’s statement, down more than 4%. The shares have come back somewhat, now trading down about 3.1% at $435.15, in a 52-week range of $299.50 to $489.29.
Shares of Time Warner were up 1.2%, at $71.47 in a 52-week range of $58.22 to $88.13.
ALSO READ: How Much Time Do Viewers Really Spend With Netflix?
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