Typing Faster

September 15, 2010

It’s Not TV. Or Is It? HBO’s Declining Subscriber Numbers

Filed under: Future of TV, HBO — petertypingfaster @ 7:04 am

For years HBO’s catch phrase “It’s Not TV. It’s HBO.” rang true. HBO was the channel of The Sopranos and The Wire. Rome and Carnivale. HBO would put shows on the air that no other broadcast network would think of touching. It carved out a niche for itself with bold, daring drama, and subscribers flocked to the channel because of it.

But not anymore.

As of the second quarter of 2010, “…HBO had 28.6 million subscribers…its lowest total in four years and the second of its first back-to-back quarterly declines in at least six years.”

So what happened? Why the sudden disappearance of subscribers? While execs at HBO were quick to point he figure at the “…unprecedented downturn in U.S. multichannel subscribers…” upon further reflection that explanation doesn’t seem to hold water. If it really was a general trend amongst all pay channels you’d expect to see the effects amongst all of them. Unfortunately that’s not the case.

HBO’s smaller pay-TV competitors, Showtime and Starz, saw increases in the second quarter; why HBO would feel the pinch from the multichannel meltdown but not its competitors suggests there may be other factors at play.

Starz and Showtime have both been on a steady rise for years: Showtime has increased by 6 million subs over the past six years, to 18.2 million in the second quarter, while Starz is close behind with 17.3 million, though its rate of increase has been less dramatic.

HBO is in a league of its own on a sheer subscriber basis, and its $1.2 billion in earnings dwarf those generated by its competitors. But that subscriber toll has been hovering between 28-29 million since 2006.

So if the general state of pay channel subscriptions, and the economy in general isn’t to blame, then what is? THR makes an interesting suggestion, namely that the key factor to blame is DirectTV.

The nation’s biggest satellite service has been locked in bruising carriage negotiations with HBO all year, according to people familiar with the talks, and applying pressure to get the desired deal terms by employing an unknown but brutally effective tactic: drastic reduction of the promotional support crucial to “upselling” HBO to subscribers.

For all the attention original programming like “True Blood” gets, it’s the less sexy subject known in the industry as affiliate marketing that is just as crucial a variable in the premium-TV business. Hunky bloodsuckers don’t sink their teeth into subscribers’ wallets without the efforts of distributors pitching in promotional dollars via direct mail, online ads, local events and the persistent hawking of customer-service representatives over the phones.

So when a distributor the size of DirecTV pulls back on all that, a pay-TV network is going to feel the pain like a vampire at sunrise. No matter how much HBO spends — even the $200 million forked over for “Pacific” — bang for the buck can’t be maximized without operators there to shill for the show.

“The marketing is hugely tied to how subscriber growth goes,” said Deana Myers, pay-TV analyst with SNL Kagan. “There’s so many elements to why subscribers sign up. It’s not all about original programming.”

And that’s the politics of show.

Advertisements

1 Comment »

  1. I believe this was Super Channel’s argument when they were having trouble gaining any traction in Canada. They complained Rogers was burying them by not helping promote the station to subscribers, etc.

    Comment by Nick — September 15, 2010 @ 9:16 am


RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Blog at WordPress.com.

%d bloggers like this: