Market Insight

HBO Go’s move to go standalone crystallises the path to unbundled future for the industry

November 17, 2017

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Time Warner’s HBO has made subscription to its online video service, HBO Go, available on standalone basis in four markets of Central & Eastern Europe.

The markets in question with their respective monthly prices are Hungary HUF 1990 ($7.50), Romania RON 19.99 ($5.07), the Czech Republic  CZK 199 ($9.16), and Slovakia €6.99  ($8.24). The first month is available for free on trial basis.

HBO Go was previously only available as a bundled proposition, where customers of HBO package would immediately receive access to the online service at no extra charge. Apart from the mentioned countries, the service is still only available as the bundled proposition for the rest of CEE region.

Customers of HBO Go receive unrestricted access to the library of HBO content; that include their premium title series, such as Game of Thrones and Westworld. New content is added weekly following their release, usually on par with the U.S.

The service is fully localised for each respective region, in both the interface and the language of titles on offer. 

*Update (29 November 2017): Following publication of this article, HBO Go has become further available in Bulgaria, Slovenia, Croatia, Serbia, Montenegro, Macedonia, and Bosnia & Herzegovina.

Our analysis

Even outside of the phenomenally successful Game of Thrones, HBO’s content represents some of the most desired selection of international series consumed across Europe. Company’s production consistently collects the highest number of awards at annual Primetime Emmy competition in US, in 2017 taking 29 Emmys for 6 separate titles. HBO’s library of content also permanently lies outside of Netflix’s offer, being a strong incentive for buying the premium pay TV package. HBO Go has been available as a bundled offer since 2011 across most CEE markets but, despite interest from copnsumers, has never directly competed with the red giant in these markets until now.

The region of Central and Eastern Europe has an exceptionally high uptake of pay TV with the help of high adoption of satellite technology, and attractive region specific pricing. The decision to open HBO Go on standalone basis inevitably carries the risk of cannibalisation of its pay TV revenue stream, but the company itself won’t be losing money if customers forego their linear offer in favour of the subscription service. DIGI, one of markets leaders in Hungary, prices HBO package at HUF 2,090  (7.90) per month. HBO Go undercuts it at HUF 1990 (7.50), and keeps the markup for distribution to itself. Therefore, it is the pay TV providers who are at risk from the current development.

Romania, Hungary, the Czech Republic, and Slovakia also happen to be the largest markets in Central Europe after Poland, for the size of their pay TV markets, or indeed the numbers of HBO Go active users. The fact that the present development takes place in these four countries, indicates confidence in the move on the part of HBO, albeit it still being a limited rollout.

The move, therefore, likely comes as HBO recognises the vacuum Netflix has involuntarily created in the market since it arrived 22 months ago. Netflix has generated interest in SVoD model, and done most of the job in educating consumers in its benefits. The vacuum in these markets, meanwhile, was created due to unjustifiably high price for Netflix. Netflix is now priced at 7.99  ($9.42) across the markets. HBO Go has chosen to vary pricing by region (see news section above), at significant discount to Netflix.

The development is a smart move on the part of HBO, and with its timing is likely to be an attractive proposition in the market, at the cost of displeasing pay TV partners. The move represents the latest step on the part of content holders towards making their offer available on standalone subscription basis online, where customers are increasingly presented with option to receive their choice of channels on a la carte basis. Customers won’t be making drastic changes in consumption habits overnight, however, the development crystalizes the  long-term outlook for the industry.

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