HBO Chairman and CEO Richard Plepler recently announced the launch of a standalone HBO streaming service that would offer all the same HBO content without the matching price tag of a full cable plan. The streaming service will be available as early as next year.
The streaming service is not some temporary means of attaining more revenue, but a well thought out and reasoned way of staying ahead of the curve in an era when the web rules all.
The simple fact of the matter is that streaming services have proven time and time again that they are popular and have a potential for profit. Netflix, Hulu Plus and Amazon Prime are all quickly becoming juggernauts of entertainment dissemination.
Netflix has been having noticeable growth over the last few years, with its large selection of movies, syndicated shows and independently produced series. Netflix has seen its stock rise from a low of $54 per share to $357 per share in a little more than two years as more investors see how it could exist as a functional business model.
It’s not just the investors who are paying attention. Netflix has seen growth in the number of paying customers it has, and will likely see more growth in the coming decade.
Trefis, a website that specializes in studying stock prices and the factors that move them, estimated that Netflix could see as many as 47 million customers by 2019. Netflix grew much more quickly than originally anticipated, and announced that by mid-June of this year it already had gained 50 million customers.
As a streaming service, Netflix is barely profitable. However, its sizeable revenue growth of 22 percent this fiscal year should be an indication of how the streaming entertainment business is no longer child’s play.
Hulu Plus and Amazon Prime are also doing well; the services have an estimated 5 million and 10 million subscribers, respectively. Each made $1 billion or more in revenue last year.
It’s important to understand why these companies are all performing at such a high level. It may be due to the fact that millennials are starting to shift the framework of how entertainment is viewed.
Millennials are not watching as much television as the generations before them did. In fact, 34 percent of the millennial population watches online streaming more than traditional sources of entertainment like television, according to a New York Times report.
That’s an important statistic because it means that 1 in 3 people in their 20s and 30s watches Netflix or some other streaming service more often than they watch television.
It makes perfect sense that entertainment companies would capitalize on that sooner rather than later, as millennials rise into the workforce and begin to earn more income. Assuming that their viewing habits don’t change, millennials are going to want accessible forms of entertainment for a price that doesn’t break the bank. Companies can either respond with change, or be left out of the equation.
If the success of other online services is any indication, HBO should have no trouble entering the marketplace with its own streaming service. After all, it already has licensing agreements with film companies and has its own line of independently-produced content.
Netflix may have award-winning series such as House of Cards and Orange is the New Black, but HBO has a cult hit on its hands with Game of Thrones.
Only time will tell just how successful HBO will be with its streaming service, but there’s a lot to suggest the company will fare just fine when the service gets up and running.