HBO: On Demand Is Paying Off

Author:
Publish date:
Updated on

The money is starting to roll in for HBO On Demand. Home Box Office's subscription video-on-demand (SVOD) service now counts 150,000 subscribers across 17 deployments.

And its mature penetration rates range from 20 percent to 52 percent — a further indication that SVOD will pay off for operators and programmers.

"Consumers value the breadth and depth of the offering," said HBO Interactive Ventures senior vice president Sara Cotsen.

What's more, HBO upgrades and revenues are on the rise, while downgrades are decreasing for HBO On Demand's most mature launches.

"The product is very compelling," Cotsen said.

Now that subscribers have been paying $3.95 a month for SVOD for nine months, HBO has a good read on SVOD's potential.

SUBSCRIBER BOUNCE

A year ago, Columbia, S.C., was the focal point of SVOD. That's when HBO's free trial on Time Warner Cable's system there overloaded the server software's ability to set up and take down viewer sessions.

Cotsen said penetration is 52 percent in Columbia. Some 65 percent of new HBO subscribers are paying for the SVOD feature.

HBO's digital subscriber count in Columbia has increased 29 percent, an indication HBO analog customers are upgrading to digital. Overall, HBO's subscriber count in Columbia has increased 6 percent, while the entire pay category has enjoyed a 5 percent bump.

Perhaps the most telling statistic is downgrades.

From July 2001 through April 2002, 2.83 percent of HBO subscribers downgraded, or completely eliminated the service, each month, Cotsen said.

In the same period a year earlier, the downgrade rate was 3.35 percent, and 3.48 percent and 3.13 percent in the two years prior to that.

"We're thrilled to see that number," Cotsen said.

Multiplexing helped stem some premium-category erosion in the early to mid-1990s, and pay-network executives hope SVOD affords the same opportunity.

PRICE POINT: $6.95

But HBO might not match Columbia's numbers in other markets, because the company is moving to a standard $6.95 fee for à la carte HBO On Demand.

That $6.95 charge also may be the final price point for premium SVOD packaging across several premium networks, Cotsen allows.

HBO On Demand sells for $6.95 in Austin and San Antonio, Texas; Portland, Maine.; Honolulu; Northeast Ohio; Tampa, Fla.; Bakersfield, Calif., and Raleigh and Charlotte, N.C. In Cincinnati, HBO On Demand is priced at $9.95.

In Green Bay, Wis., HBO On Demand launched alongside sister service Cinemax On Demand, as well as SVOD packages from Showtime and The Movie Channel, for $6.95.

That same package and price will be introduced in Los Angeles later this month.

Comcast Corp.'s HBO On Demand launches in Arlington and Alexandria, Va.; Mobile, Ala., and Chesterfield, Va., made the product part of the systems' current digital bundle. Digital HBO subscribers didn't pay extra for the on-demand feature. Nor did subscribers in Adelphia Communications Corp.'s Cleveland system.

Cablevision Systems Corp. has instituted a $4.95 price point for HBO on the MSO's iO: Interactive Optimum VOD platform.

Although HBO now sells On Demand for $6.95 per month, Cotsen said it's too early to determine how far penetrations will climb at that price.

"At $6.95, consumers are very excited about it," said Cotsen. "We'd like HBO On Demand to get the maximum distribution and tie it to digital. We think it's a very viable product."

SERIES RULE USAGE

HBO's original series — such as Sex and the City, The Sopranos
and Six Feet Under — continue to lead the charge in usage.

"The series really drive usage," she said. Some 65 percent of HBO's SVOD product consists of original material, including series, specials and documentaries. The balance is made up of theatrical films.

The average viewer accesses 12 programs a month for an average viewing time of 33 minutes, she said.

Usage still peaks on weekends and in primetime. Over time, weekend usage has increased, Cotsen said.

Initially, HBO refreshed content each Wednesday, which led to a spike in activity. In the last several months, the programmer has updated content each Monday, one day after many of its highly-acclaimed Sunday night programs debut.

New Sunday shows are on the server on Monday, in addition to their replays throughout the week on the HBO linear channels.

Over time, HBO has added some new features to its on-demand lineup. The network has added some exclusive-to-VOD, behind-the-scenes footage from The Wire
and Six Feet Under, Cotsen said.

HBO also has added a "Spotlight" feature. Next week, the "Bad Girls Spotlight" will feature the movies All About Eve, Bedazzled, Black Widow
and Klute. "The Spotlights have been very successful," Cotsen said.

Even with HBO's well-known product and à la carte price point, educational marketing remains important so consumers understand what they're getting, Cotsen said.

"Education has definitely played in where marketing hasn't been as strong," she said. "With Time Warner Cable, they are charging for it. People are more aware of what it is."

MARKETING EFFORTS

Some markets offer a free trial before the à la carte fee is introduced. In other markets, on-screen sign-ups help to drive sales.

In Cincinnati, HBO On Demand sits on its own channel, next to the flagship HBO. That channel features a sales video and allows consumers to upgrade to HBO On Demand with their remote.

The Austin system provided HBO On Demand free to several radio personalities, who talked about it on air, thus driving calls. The programmer also provides customer-service representatives with training materials and maintains an HBO On Demand Web site, to let subscribers know of the new content arriving each Monday.

Related