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HBO’s new streaming service won’t kill cable companies. It might make them stronger

You have no idea how close this article came to just being a bunch of Game of Thrones jokes.
You have no idea how close this article came to just being a bunch of Game of Thrones jokes.
HBO

The news that HBO is launching its own independent streaming site — which will, like Netflix, be available to non-cable subscribers — sent paroxysms of joy through cord cutters everywhere. Finally, America's most consistent content provider will be available without having to bind oneself to the shackles of Charter or Comcast or even DirecTV. And with the service launching in 2015 — we don't know much about it beyond the fact that it will be standalone and at least somewhat similar to the company's pre-existing HBO Go — it's arriving much sooner than anybody thought it would. (I had it pegged for 2017, so that shows how much I know.)

But what this shouldn't be read as is a tacit acknowledgement that cable companies are going to go the way of the dinosaur, getting slowly frozen out of the entertainment industry like big-box bookstores or record labels. Certainly cord cutting is the biggest threat cable companies have faced yet to their dominance over the means of television distribution. And the news today that CBS is launching a similar service suggests getting TV over-the-air will seem antiquated soon enough.

But what's easy to miss here is that said cable companies have merrily gobbled up the vast majority of means by which Americans might access this new standalone HBO. That's why HBO's announcement comes along with the thought that the company might partner with cable companies to offer some sort of HBO deal related to buying broadband service from them.

Or, put another way, this might be the death knell for cable companies. But it also might be the ultimate signifier of just how much power they truly have.

Why did this take so long?

The reason HBO hasn't launched a standalone streaming service yet is simple. Up until this point, it's made too much money from the standard operating procedure, wherein customers would pay cable (or satellite) companies for access to HBO, then the network and cable companies would each take a cut of those proceeds. (The reality is slightly more complicated than that, but at its heart, this is what it boils down to.)

Until recently — and, markedly, since Netflix actually started turning a profit — the idea that an HBO streaming site could possibly make enough money to offset the anger that would ripple throughout the nation's cable monopolies was a pipe dream. Basically, it's incredibly expensive to be HBO. Shows like Game of Thrones are among the most expensive in TV history, even when inflation is taken into account, and the network also has a history of supporting smaller, quirkier shows that don't argue for themselves monetarily but do artistically. (At present, this would best describe the network's terrific Getting On, a comedy set in an elder-care ward.) Cutting off money from cable subscribers was always a dangerous proposition.

Because the cable companies controlled HBO's most likely source of revenue, the network was boxed in, even if it wanted to launch a streaming site. Angering cable companies would likely have resulted in higher fees for HBO to pay, in effect giving cable providers a larger slice of the HBO subscription pie that underwrites all that great programming.

HBO has always operated under the principle that ratings essentially don't matter — since it doesn't need to attract advertisers — so long as some specific number of subscribers are paying for the channel just to see a certain program, or watch boxing, or check out first-run movies, or any other number of things. HBO Go was meant to be an online extension of that — access to almost everything HBO had ever made in one convenient place. All you had to do was pay a cable subscription fee!

But that picture has shifted recently. Netflix has emerged as a real competitor to HBO in almost every sense, and though the population of cord cutters is still exceedingly small, it grows with every survey taken of the American TV viewer landscape. And HBO has been exploring its options with this audience, by licensing much of its past library to Amazon Prime (a deal that may complicate just how much of its past material it's able to offer on its new streaming service) and by acknowledging that many who watch content on HBO Go may not, strictly speaking, be HBO subscribers.

Indeed, because of the complicated webs it's enmeshed in with various content providers, whatever streaming service HBO launches will almost inevitably be a half-measure at best for a while. But it would be a mistake to write off a network that boasts deep pockets and long-standing relationships with nearly every major player in Hollywood. It's easy to imagine a version of this story that ends with streaming HBO making even more money, further lining the coffers of Time Warner, its corporate parent.

But it seems just as likely that HBO's symbiotic relationship with cable companies will continue. In fact, it will almost have to if the company's new venture is to be a success.

Why cable companies will never die

The thing about disruptive media technologies is that the companies who tend to win out in the end are those that were standing before those media technologies came along. This is not always true (look at print media, for instance), but it's tended to be true in movies and television in particular.

Home video came along and seemed like it would be a new leveler, opening up film distribution to low-budget outfits that saw some success in the ‘80s but ultimately ran out of cash and were replaced by giant media monoliths. Independent film seemed like it would be just the thing to puncture Hollywood hubris, until nearly every independent distributor was purchased by a major media conglomerate. The same happened with tiny cable channels, which may have started as offbeat, niche networks but ultimately grew broader and broader as the imperative to turn profits grew sharper. After all, when's the last time you watched arts programming on A&E or Bravo?

This is why I'm leery of predictions of the death of cable conglomerates. Is it theoretically possible that some other company could swoop in and gobble up all of that business, or for the United States to decide broadband internet is a public good? Sure. But it seems much more likely that companies like Netflix and HBO will simply choose to use the internet avenues that already exist — filled with potholes they may be. And that necessarily means dumping even more money into cable coffers. (The companies actually affected by this news may end up being DirecTV and Dish Network, both of which have strived to launch their own HBO-style programming hubs in recent years.)

That's why HBO makes sure to mention working with cable providers to pick off people who only receive internet service through their cable providers as "low-hanging fruit" in its quest to find subscribers. After all, this is another relationship that can be mutually beneficial for HBO and the cable providers it's partnered with for all these years. There may be many questions about just what will be on this streaming service — from questions of how much of HBO's library can realistically be offered in the wake of the Amazon deal to questions about which movies it could offer — but the network seems satisfied in the means of delivery it will exist within.

Ultimately, this announcement isn't the opening of some general war on cable companies but, rather, a war on cable companies as we understand them. (The next shoe to drop in this equation will probably be ESPN offering something similar.) The future of television probably looks like subscribing to a bunch of a la carte services — an HBO here, a CBS there — that offer you content from a variety of networks and studios, and it will probably add up to something fairly similar to your current cable bill (if, indeed, you have one).

Theoretically, this will give viewers more freedom — if you really don't want CBS, you won't have to get it. In practice, it will probably just underline the insanely complicated tangle of ownership that underlies programs on any TV network. Both The Big Bang Theory and NCIS air on CBS, but they're produced by different studios. In the future, does CBS license Big Bang — which is owned by Warner Brothers — or does the studio go it alone on its own streaming service? Content will probably ultimately trump where you get that content.

That, for instance, is why Netflix is so desperate to produce its own content. The future of movies and television belongs to the content providers, those who can make stuff you'll pay good money to watch, and not the syndicators, who simply pay fees to distribute others' content. But the future of movies and television probably also belongs to those who will provide the broadband service that content streams over. And those will probably be the cable companies.

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