Technology

HBO Joins the Movie Download Derby


The Time Warner unit is launching HBO on Broadband, allowing consumers to watch movies and its pay-TV shows on the Web for "free"

It seems you can't read the news these days without coming across a new, improved, gee-whiz service that will make downloading movies and TV shows easier than opening a jar of peanut butter. DVD-by-mail service Netflix (NFLX) is gearing one up. Sony (SNE) just expanded its offering; same for TiVo (TIVO). And of course, Steve Jobs announced his new, improved Apple TV and video iPod on Jan. 15 with all the fanfare that only Apple (AAPL) zealots can muster (BusinessWeek.com, 1/16/08).

Here's the latest entry in the what-you-want, when-you-want-it movie download race: HBO, Time Warner's (TWX) iconic superbrand pay-TV service. The new service is called HBO on Broadband, and while Comcast (CMCSA) CEO Brian Roberts mesmerized a recent Consumer Electronics Show audience (BusinessWeek.com, 1/11/08) with visions of TV shows and movies capable of streaming lickety-split across his cable TV wires, the guys from Time Warner are offering what is clearly a work in progress.

First, the basics: You can watch the live HBO feed online, choose from more than 350 movies, and download and store such TV shows as Sex & the City, The Sopranos, and Entourage. It will set reminders for you when things are on, allow you to preset to record movies and TV shows when they air on the cable network, and suggest new stuff that maybe you would like to watch.

HBO describes HBO on Broadband as free. But to get the service, a cable subscriber will need to have already paid not only the $12 or so a month to get the pay channel, but also the $30 or $40 a month to get a cable operator's broadband service. That's right. The free HBO actually costs subscribers $52 or more per month because consumers will first have to dip into their pockets to buy HBO from their cable or satellite provider, and then add broadband service from the same provider. By contrast, a rival pay-TV network, Starz, offers a similar download service for $9.99 a month that doesn't require you to have a video subscription. (Starz says it will soon start offering an HBO on Broadband-like service called Starz Play that will be "free" if you already have a video and data subscription.)

Service Makes Debut in Wisconsin

Sounds great, doesn't it? And technologically, it is first-rate: Downloads are near instantaneous, thanks to buffer technology that allows you to start watching even while the show is being downloaded. Pictures are ultrasharp, even when they're blown up to a full screen from their three-inch by three-inch display box.

So when Time Warner starts to roll out the new service on Jan. 21, why are they only doing it in a single system in two areas—Green Bay, Wis., and Milwaukee—when Time Warner owns 23 systems from Hawaii to Portland, Me.? No, it's not a test, says HBO Co-President Eric Kessler, although he expects some fine-tuning. "We're involved with discussions with other service providers, and we expect to have some to announce down the road," he says.

In fact, Time Warner has been dabbling with HBO on Broadband for more than two years. According to sources, HBO had all but locked up the giant cable operator Comcast, which had been expected to have Roberts announce their agreement during his Jan. 9 speech to the crowds at CES. The deal, according to those sources, collapsed over how much of the operating costs—roughly 50¢ a subscriber—that Comcast was willing to absorb. Comcast was also being asked to front some of the costs to market the service. Comcast didn't respond to requests for comment. HBO declined to comment.

Comcast Could Still Come on Board

HBO's Kessler says the company is talking to all providers, including telcos such as Verizon (VZ) that have deals to also offer Internet service. Comcast, which controls roughly 20% of America's TV sets, may soon come on board. The cable giant is in the process of renegotiating its contract with HBO.

What HBO does have going for it is a killer brand name and some of the best shows on TV today. It has 400 hours of entertainment, compared with maybe 150 hours of video on demand for many cable operators. You get HBO movies, and they come from most of the biggies, such as Warner Bros., Fox (NWS), Universal, and New Line, but only when HBO has the rights to them, which starts about nine months after they hit the theaters and then lasts for only 18 months.

You also get its Emmy Award-winning lineup of shows, but not the entire season for some of them. For example, you can get the full season of Curb Your Enthusiasm. But there are only four to six episodes of Sex & the City available. HBO, which will refresh about 25% of its offerings every week, says it needs to save space on the service for sports documentaries, kiddie programs, and other stuff. HBO could also be wary of cutting into its DVD sales for some of its more popular offerings.

There are some other aspects to HBO on Broadband that were clearly designed to appeal to cable operators, who still pay the majority of the pay-TV service's bills. While the online service is available on up to five registered computers or various devices, there is a very sophisticated authorization process to make sure nonsubscribers can't log on. What's more, you can't gain access to the service away from your house like you can with Slingbox. You can, however, download and store movies to watch them on your laptop when you are away from home.

Still, HBO can give subscribers what HBO's Kessler says is the real prize—"the content that they want, when they want it." He figures the service will help operators such as Comcast attract new customers who haven't plunked down their money for either HBO or Comcast's online service.

See the BusinessWeek.com slide show for more about movies online.


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