HBO Now ‘surpassing expectations’, international OTT launches due soon

Subscriber satisfaction for HBO’s US over-the-top service, HBO Now, have surpassed expectations with announcements about new country launches likely to follow “in the near future”, according to HBO CEO Richard Plepler.

Speaking on the second quarter earnings call of HBO parent company Time Warner, Plepler said that less than 1% of HBO subscribers have axed their bundle to switch to HBO’s new US over-the-top service HBO Now since it launched in the US in April. He also predicted that while it is still early days, HBO Now will be “very profitable in the coming quarters.”

“Everything we’re seeing both from sampling and from subscriber satisfaction has exceeded our expectations. With regard to any kind of cannibalisation, I can tell you, as we predicted and as our research indicated, we’ve seen less than 1% of HBO subs leave the bundle to go get HBO Now, which is exactly what we suspected was going to happen,” said Plepler.

Asked specifically about when the company will roll out HBO Now overseas, the HBO chief said that the launch of HBO Go as a pay-monthly, standalone online service in the Nordics back in 2012 had been an “interesting case study” and “shows the power of a multilateral approach.”

“We’ve grown OTT subs in Nordic and we’ve grown our linear business. So we look at that and we will be making announcements in the near future about new OTT businesses. But we’re going to take it on a case-by-case basis. We’re going to follow the money, and we’re going to focus on profits, as we always have done,” said Plepler.

In the US, he described the estimated 10.7 million broadband-only homes as “low hanging fruit” and a “huge opportunity” but said HBO was also targeting the 70 million people that don’t already subscribe to HBO via pay TV.

“We want to go after that market as well with our partners. That’s why we were very excited last week to see Verizon Wireless sign up for HBO Now. We think that’s going to be followed by other distributors doing it. It’s a huge opportunity for them to grow their businesses,” said Plepler.

“We see this as additive for our partners in the traditional business, and we want to continue to drive that point, because there’s gold in the hills for them too.”

Overall, Time Warner said that HBO’s revenues increased 1% year-on-year in Q2 to US$1.4 billion – with an increase of 4% (US$40 million [€37 million]) in subscription revenues, partially offset by a decline of 7% (US$19 million) in content and other revenues.

Adjusted Operating Income decreased 8% to US$508 million, as the increase in revenues was more than offset by higher marketing and technology costs, primarily related to the launch of HBO Now.