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Will Sports Learn from HBO’s Grand Online Experiment?

Rob Pegoraro
Contributing Editor
Yahoo Tech
TV channel schedule

(Rob Pegoraro/Yahoo Tech)

Until last week, the “HBO argument” was a big reason people were hesitant to fire their cable or satellite-TV providers: HBO just wasn’t available any other way.

But now the tide is turning, and the HBO argument is losing its grip. The premium network’s revelation last week that it will start selling Internet-only subscriptions next year represents a major reversal for the company. The move was certainly expected … but only eventually. Not nearly this soon.

Not only has HBO done financially very well by tying access to its original programming to pay-TV subscriptions, but it is also owned by the entertainment conglomerate, Time Warner, that until 2009 ran the nation’s second-largest cable service, Time Warner Cable. 

And HBO and TW executives had spent years declaring that online-only subscriptions offered no business advantage over their “TV Everywhere” strategy of forcing viewers of the HBO GO service to log in with a cable or satellite account.

Some even questioned whether any wave of cable-canceling “cord cutters” existed outside of the people whom Time Warner CEO Jeff Bewkes brushed off at 2012’s Cable Show convention in Boston as “economically challenged customers … many of [whom] didn’t even have broadband at home.”

Surprise! We exist. And HBO says it’s now getting ready to take our money.

HBO’s not enough, but it’s not alone
At the same time, it would be a mistake for cord-cutters such as myself to hoist any “Mission Accomplished” banners. For all the yammering online about the desperate need to watch Game of Thrones without a cable or satellite account, HBO by itself is not enough to sate even a casual viewer’s appetite.

(I’m assuming that HBO will not make this new standalone service deliberately unappealing — say, by charging more than the $18/month forecast of one analyst or by confining it to apps that won’t output video to a TV. Perhaps I’m being too optimistic.)

HBO, however, has significant company in this conversion. The day after its news broke, CBS announced that it, too, was launching an Internet-only service, a $5.99/month “All Access” offering that includes live streaming in 14 CBS markets.

And then Univision revealed that it would also start offering its content online

Meanwhile, Verizon is moving forward with plans for an online-only mobile video service in which you wouldn’t have to buy dozens of channels you don’t want just to get the ones you do.

And across the border in Canada, the government is considering requiring cable operators to offer a la carte service. That has sufficiently enraged TV networks — Viacom executive Keith Murphy hyperventilated that it would end in “a consumer welfare destroying death spiral” — that some are threatening to move their channels to online-only distribution there. 

So is cable doomed? No. Not when it (typically) offers by far the fastest broadband speeds for consumers. At TWC, for example, Internet-access subscribers already outnumber TV subscribers.

Sports are different. And stubborn.
I’ve been saying for years that the bogus value proposition of subscription TV doesn’t scale. The model, essentially, asks viewers to subsidize ever-larger bundles of unrelated channels to get the ones they want, as if they were the National Endowment for the Arts. 

But the business model in sports networks is even less sustainable. Here you have immensely profitable sports teams — many playing in taxpayer-funded venues — setting up regional sports networks in partnership with cable or satellite operators. These “RSNs” then get bolted onto standard programing bundles across vast territories. 

The result: Viewers get to subsidize a team they may outright hate, as if they were the National Endowment for Sports. Go ahead, ask a San Francisco Giants fan in Los Angeles about the appeal of underwriting the Dodgers through their SportsNet LA venture, for which TWC paid $8.35 billion for distribution rights.

And while all the major sports leagues have offered live-streaming video for years, they rarely let you watch your own city’s team, lest its RSN deal be threatened. At the NBA, for instance, the sales pitch for its League Pass invites you to pay $149 a season to “Watch your 5 favorite teams” — which for many hoops fans translates to “Watch your second- through sixth-favorite teams.” 

(Major League Soccer breaks from this orthodoxy by letting individual teams choose whether to impose a regional blackout, but most still do.)

If this weird refusal to let people watch their home teams online will change anywhere, look to baseball. This summer brought reports that MLB.tv will bring live “in-market” streaming next year to viewers who log in with a supported cable or satellite-TV account — which is also how it’s offering live-streaming of the World Series for the first time, starting tonight.

If that comes to pass on Opening Day 2015, MLB will discover what HBO has been seeing for years: Cord-cutters will borrow the cable or satellite log-ins of friends and watch that way, because the network involved won’t take their money and sell them the one thing they really want. So eventually, it becomes thinkable, not to mention profitable, to let those viewers pay directly. 

A la carte video may, in fact, catch on soon. Although I fear I’m being too optimistic. You certainly could have said that of anybody predicting that HBO would sell online-only viewing by 2015. Or that the 2014 World Series would feature the Kansas City Royals.

Email Rob at rob@robpegoraro.com; follow him on Twitter at @robpegoraro.