That’s how Michael Gaston, who henceforth and forever more will be referred to as “the author,” starts off his point that Netflix will essentially go the way of Blockbuster. While the writing of a rebuttal on my part is no less a shameless or comedic than the author’s meant-to-provoke title and HBO Comedy itself, allow me to take the bait anyway. As I can’t stand by idly and listen to a claim that on its face, deep down under, and sideways, makes no sense whatsoever.
Let me start off by stating the obvious: HBO will not be taken “down” by Netflix in any foreseeable future. While the author’s most definitive sentence in this regard was left to the title (as his actually essay steers shy of actually reiterating his claim) the author’s notion that HBO is somehow doomed fails to recognize several rudimentary points about the media business.
One such point, is that a data mining exercise, completely unscientific in its nature, somehow unearthed that the magical price (aka, the average) HBO could sell a monthly subscription at was for $12. And with that number, the author then concluded that HBO wasn’t leaving any money on the table, and–there’s just so much wrong with that. If I even try to pretend that $12 is somehow symbolic of the average price people would be willing to pay for HBO, why on earth would HBO sell it at that price? Not to even bring up price discrimination, but at the very least, HBO will be looking for the price that brings in the most profits, not the price that the “average” person would pay.
Another point the author makes is that HBO is a “victim of the old model”. If by victim, he means four times as profitable as Netflix, then sure, HBO is a victim. Now obviously, one could make the argument that Blockbuster was once much bigger than Netflix, but that was an entirely different story.
Blockbuster was a victim to technology, and tried to copy Netflix without the knowhow or the proper head-start. Admittedly, HBO had to “copy” Netflix in order to get in the SVOD game, and they will essentially be copying them if and when they free themselves from the shackles of the “old model.” But they won’t be doing it without a head-start. The problem with Blockbuster was that it didn’t have anything that Netflix couldn’t buy. All the movies, all the TV show DVDs, and all of the documentaries, were things that Netflix could buy the rights to on their own. That’s not the case with HBO. Netflix can’t buy “The Sopranos,” “True Detective” or “Veep” without HBO allowing it do so. In fact, it’s the other way around. HBO can buy 99% of Netflix’s library of content, which has far less original programming than HBO’s library contains.
And going back to that whole “old model” thing. That old model that helps HBO make 4 times the profits of Netflix has its benefits. It offers free marketing, handles customer relationships and provides revenue on a monthly basis while giving over 100 million Americans the ability to get HBO at any time–which is more than the estimated ~86 million US people that have access to broadband internet. And the author makes it seem as if being a part of a content conglomerate that is dependent on the old model’s structure is a bad thing. If anything, that elevates HBO’s status within the company, marking its independence from the rest of Time Warner and suggest HBO’s plausible, and oft-hoped for, move to being a standalone company.
The author ends with the point, and the assumption, that HBO needs to go direct to consumers, saying “Even if HBO Go went direct tomorrow, they’d still lose.” So let’s pretend that’s the case, and act as if HBO has to go direct at some point, despite the fact cable doesn’t seem to be going anywhere, and that as long as it’s here, it will continue to be a behemoth. If that’s the case, why exactly is HBO losing? Yes, I understand that HBO doesn’t have the know-how in marketing, or CRM, but those are rather mundane business functions that any idiot MBA could fulfill. CRM would take some time to master, but its mainly an operations issue. And while digital marketing may be something that a tech company like Netflix may have the upper-hand with…brand marketing? Not so much! HBO has created a brand that is the work of much more than a few good shows. It’s the product of a development team, in roads with every film school and film festival worth a damn, and…well, those good shows don’t hurt either.
If there’s anywhere HBO has a long hill to climb, it’s internationally. While HBO has relationships and revenues from other nations, it doesn’t have a budding SVOD model of any kind. But let’s not pretend like Netflix reinvented the wheel with their international strategy, as it’s a pretty simple plan. They go to new countries, sell them on Netflix with local content, and they may potentially develop shows specific to those areas–and they may not. If you’re telling me HBO is incapable of doing that, all the while generating much more in cash, I’d have to agree to disagree.
But the author appears to ignore all of this. In his mind, the internet will take down HBO, because that’s what the internet does to stubborn companies who don’t do what the public wants them to do when the public wants them to do it. After all, that’s what happened to Blockbuster, right? They didn’t listen. So any company that thinks for itself is doomed then? Like the newspaper and magazine companies of yesteryear…?
But is that what happened to Wal-Mart when they got to e-commerce late? Is that what happened to Vice, which was a fledgling, print magazine? Is that what happened to broadcast TV, which didn’t want to put any thing online for what seemed like forever?
Those companies survived the internet of things, because even though they were late, they had brands, core competencies and the cash to overcome those pitfalls. They’re not necessarily defensible assets, but hardly are Netflix’s either. And not only does HBO have branding savvy and HBOGo-ready technology to bring it into the future, it also has boatloads, and boatloads of cash.
Now, HBO wouldn’t be the first company to spend their cash incorrectly, but if what the author is suggesting is that HBO will foul this up, I suggest they check the scoreboard and see exactly which company is better at making hitting the mark, both internally and on the The Streets .