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Tuesday, April 9, 2013

HBO Helped Build the Cable-TV Business. Now it Might Help Break It

Posted By on Tue, Apr 9, 2013 at 10:30 AM


NPR on Sunday reported that HBO "doesn't mind" that its hit series Game of Thrones is widely pirated. But of course the network minds -- many of the estimated 1 million people who illicitly downloaded the first episode of the series' third season (and that was just the day after it was on TV) are potential customers, at least if HBO is available on cable where they live). And HBO would much rather that they pay for the the shows they watch. The most that can be said is that with the future of the television industry so incredibly murky, HBO doesn't yet know what to do about anything, piracy included.

The only person quoted in the NPR story saying anything concrete about piracy wasn't even an HBO executive, but rather one of the directors of Game of Thrones, who was quoted indirectly by the person NPR interviewed -- a Graham McMillan, a Wired reporter. Meanwhile, HBO's official stance -- and no doubt the stance of the people on the business side, is that it opposes people downloading illicit copies of its shows. And the company still enforces its copyrights, at least to some degree. A few people in the comments on NPR's page even said that they'd received warnings from their ISPs recently that they'd been flagged for downloading HBO shows.

Nonetheless, HBO has in recent years grown a bit more circumspect about online distribution -- including the illicit kind -- than it has been in the past. The network at least acknowledges that it's a complicated subject. For one thing, it doesn't consider every downloaded copy a lost sale. It's impossible to know how many downloaders, if piracy didn't exist, would have signed up for HBO just to watch that show rather than waiting for the DVD release. Probably not too many.

For another thing, the network seems to know that piracy helps build buzz for the show. TorrentFreak has reported that Game of Thrones was the most-pirated show of 2012. The show in fact has become sort of a symbol of the disruption of the TV market, of which piracy is just one facet. But the more people who watch something, pirated or not, the more it gets talked about, and HBO no doubt has gained some number of viewers thanks in part to piracy. Even the network's head of programming, Michael Lombard, has called piracy a "compliment," in that it validates the popularity of HBO's programming.

In the meantime, HBO seems to be flirting with the notion of making its HBO Go Internet streaming service available to anyone who wants to buy it, even if they don't subscribe to cable, which they must do now to get access. So far, it's no more than a flirtation, but it seems increasingly clear that it's going to happen at some point, whether it's this year or three years from now.

When it does, it will be a major move in the direction of breaking cable's stranglehold on the TV market. HBO is one cable's main draws (along with sports, local programming, and a relative handful of other networks). While the cable industry likes to downplay the phenomenon of "cord cutting" -- which is happening largely because of the increased availability of TV and movies streamed over the web -- the phenomenon is nonetheless real. It's true that for now, the numbers of people leaving cable behind is small. But it's growing, and just a couple of major breaches in the wall could be the start of cable's downfall.

That doesn't mean cable will just vanish, of course. For one thing, making HBO Go available outside of cable would cannibalize its existing business. To what degree is hard to say, but the network presumably thinks it's making more money staying entirely with cable than it would by offering streams to the masses. For another, the network would have to compete with streaming services like Amazon and Netflix, which are incredibly cheap and have a much huger selection than HBO does. Of course, HBO has unique, often-high-quality programming, but perhaps not unique and high-quality enough to justify a big premium over such competitors. Also people who watch a lot of sports will still want cable, since it will probably be a while yet before live sporting events are both widely available and sufficiently watchable on the Internet.

Nevertheless, the cable industry's practice of bundling all TV into one package (or into a menu of different, incredibly confusing packages) and forcing people to swallow it all for a gigantic monthly bill, is terrible for viewers. And given the amounts of money being thrown at various alternatives, it seems likely that sooner or later, people will be paying just for the stuff they want to watch. What television will look like at that point is anybody's guess.

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Dan Mitchell


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