Come At The King, You Best Not Miss

What can credit unions learn from HBO about innovating in the face of competition and the corresponding branding challenges?

Come at the king, you best not miss.

So says Omar Little in the eighth episode of the first season of the HBO television series, The Wire. It’s a quote that has come to not only define the show, but also, in a television landscape changed by on-demand viewing sites such as Netflix, HBO itself.

The history of HBO is one of success through differentiation (A popular catchphrase being: It’s not TV. It’s HBO) and quality of content. In 1997 the network received 90 Emmy nominations, for the first time exceeding any broadcast network’s nominations.

In 1998 it premiered Sex and the City; in 1999, The Sopranos; in 2002, The Wire; in 2011, Game of Thrones, the most watched show in the history of the network. In 2014 it received 99 Emmy nominations, led by Thrones, which received 19, the most of any show. In 2014, HBO reported $1.8 billion in profit and has added more subscribers in the past two years than in any of its previous 30.

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But even in this success, competition has intensified. In 2013, Netflix, then best known for red envelopes, debuted House of Cards, an original, online-only web television series. It became the first show of its kind to receive major Emmy nominations, leading Netflix to 14 total nominations in 2013. In 2014, the streaming service received 31 nominations, more than Fox or Comedy Central.

Netflix’s Threat To HBO

The rise of Netflix presents an interesting crossroads in television history. One in which HBO and Netflix, two of the largest and most popular producers of television content, are diametric opposites. HBO has a vast content library produced in-house but a lacking online presence, and Netflix has the online presence but little in-house content. The only way for either to grow in any substantial way is to become like the other.

The goal is to become HBO faster than HBO can become us, Netflix’s chief content officer, Ted Sarandos, says in a February 2013 GQ piece.

Though it doesn’t publically release viewership totals, Netflix has grown from 33 million to 57.4 million subscribers, increased revenue from $3.6 billion to $5.5 billion, and boosted its stock price 400% between 2013 and 2015. Its total 2014 profit of $403 million lags behind HBO, but make no mistake, Netflix is dangerous.

Netflix is bigger than every single cable and premium-cable network in the U.S. No matter how well programmed, powerful, or profitable HBO is today, you can’t look at that scale and might and not feel the need to act soon, says Liam Boluk to Fast Company. Two to three years ago the average user was watching one hour of Netflix per day. Today, it’s nearly two hours.

Now, It’s HBO’s Time To Innovate

HBO, on the other hand, has been hard at work in improving its digital streaming platforms. In 2010, it launched HBO Go, a streaming service on computers, phones, and tablets for customers with an existing HBO subscription. Suddenly, people could stream HBO, time-adjusted, whenever and wherever. Still, they needed a cable subscription and then had to pay extra for HBO, possibly contributing to high piracy levels. Netflix with a simple sign-up model and with the relatively new price of $8.99 per monthwas a better deal.

Then in April 2015, HBO Launched HBO Now, an online-only streaming service, which, for $15 a month (roughly the same price HBO charges for its regular pay-TV network), does not require a cable subscription and provides customers with hours of HBO’s content. It’s regarded as the network’s answer to Netflix.

The movie is a big risk and may change TV consumption forever. For less than $25 a month, consumers have access to Netflix’s 50,000 some odd movies and shows, and much of HBO’s content library (estimated at 600 hours). It presents a very real challenge to the traditional cable television system a 2014 report by the FCC lists the average monthly price of expanded basic service cable at $66 in 2014 and may give rise to widespread cord cutting, as young adults cancel these services in preference for online-only options.

How Will This Affect HBO?

HBO Now marks a large decision for HBO, not only in the way that TV is consumed, but in that way that people interact with the company. HBO Now allows the company to better compete with Netflix and potentially grow its membership base. But there may be unintended consequences.

For one, will customers cancel their regular HBO subscriptions? How will cable companies, which Fast Company reports generates most of HBO’s $5.4 billion in revenue, respond to this? How will this service compare to its other services and if it’s worse, how long will customers put up with the bugs?

Until now, because HBO existed as an add-on to a cable bill it wasn’t as concerned with sponsors or ratings as commercial broadcast networks such as Fox or NBC. It received revenue from customer’s cable subscriptions, regardless how much they watched the network. It has always considered itself a high-minded, almost niche service, but there’s a question to ask as to how HBO Now will affect HBO’s content offerings? Is it enough to have Game of Thrones and a bunch of niche hits such as the oft discussed but seldom watched Girls? Or to get and continue to grow this independent service offering, will it need to lower its taste to reach a broader market

Maybe. Maybe not. What’s clear is that this is a power move by a power player. Netflix now has HBO’s attention. And I’ve got just one piece of advice: Come at the king, you best not miss.

April 22, 2015

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