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Cable networks in the United States and an HBO case


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A quick outlook: the cable TV industry in the United States, and HBO as a great example of what a successful company in this field should be doing in order to stay competitive

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Cable networks in the United States and an HBO case

  1. 1. Cable networks in the U.S. and the HBO case 2014, Michael Kareev
  2. 2. Industry outlook Revenue Annual growth, 09-14 Annual growth, 14-19 $56.0bn 1.7% 1.3% Profit Wages Businesses $3.9bn $6.4bn 425 Industry structure Life cycle stage Mature Regulation level Heavy Revenue volatility Medium Barriers to entry High Capital intensity High Industry globalization Medium Concentration level High Competition level Medium
  3. 3. Product segmentation and summary 26.8% 7.2% 1.8% 3.3% 33.6% 27.3% Revenue segmentation Specialty TV program advertising Network compensation Local advertising Broadcast TV program licensing National and regional advertising Other Summary: • Number of customers is growing proportionally with per capita disposable income • Increase in ARPU partially offsets overall drop in advertising • Availability of sports programs – key • Internet-based services are getting stronger • Infrastructure costs are decreasing • Time available for TV viewing – limiting factor • Multiplatform and a la carte – what users want • Regulators: see TV Consumer Freedom Act 2013 and Canada case
  4. 4. Some problems/challenges in the industry Viewers Landscape Ease of access + delivery issues Competition Content acq-n and production costs Regulators Shortening attention span Decrease of available leisure time Other means of entertainment (games is a threat) Bundle plans, equipme nt, various IDs – turn users away Internal (Showtime) + external (Netflix, Hulu) + piracy The existing model presupposes expensive programming TV Consumer Freedom Act, Canada case
  5. 5. HBO essentials • Revenue of $4.89bn (17.9% of TW revenues) and operating income of $1.79bn • Strong emphasis on U.S., South America markets; lesser extent – Asia, Scandinavia • Has around $30M U.S. subscribers • Is known for high-budget programming • Doesn’t rely on advertising • Benefits from existing ecosystem (see next slide)
  6. 6. How it works HBO HBO HBO HBO HBO cable operators and HBO GO ITunes, Amazon Local players (Imedia) viewers viewers viewers viewers viewers $$ $ $$ $ • Pay per view • Some episodes • Online or download $$$ What everyone wants:Existing models:
  7. 7. How HBO benefits from the existing model • A big part of revenues arrives from subscribers: cable companies guarantee a specific number of viewers and a sum to be paid in advance plus additional revenues from customers on top of that. It helps to plan in advance and engage in capital intensive activities (Game of Thrones, etc). • It is always easier to sell in bulk rather than going for individual customers (social campaigns, various promotions that might hurt a brand perception) • The majority of HBO viewers consume different content and do not actually require an “HBO only” option; it is millennials who do • Strong marketing support from partners: from additional advertising to 1-3 months of free HBO programming for new customers; people are less likely to unsubscribe after watching for a while • HBO doesn’t invest in infrastructure to deliver the signal (see Netflix’s costs on delivering HD overseas) and doesn’t face the problem of the last mile
  8. 8. What should HBO do next? Cross-production Expand Sports offering Seamless access (technology) Affiliate sales and emphasis on metrics Produce the content for platforms (“pipes”) to get better contracts in return Sports viewing is growing faster than any other category in the 18-30 age group, see Red Bull case Keep working in order to form habits: one ID, auto-authentification Measure user engagement and focus on users’ multiconsumption You either control the content or the pipes (c) somewhere from the Internet Cross-promotion 2-way engagement Responsive ads and in- movie branding Go International Partner with CNN (place ads), Amazon (buy a DVD, a t-shirt in one click while a show is aired) Games  TV (see Electronic Arts), influence the narrative using mobile devices Make ads on mobile devices a part of consumer experience (see Mercedes case) Do it through web apps (Scandinavia case), rather than through partnerships; add ads
  9. 9. Sources used: HIS IbisWorld Hollywood Reporter