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HBO had a bunch of hiccups when the company was first working to put out a subscription streaming service, but eventually HBO Now got off the ground with a splashy launch and a 30 days free subscription for early adopters. However, despite the splashy launch, HBO is admitting that HBO Now has not been the quick success the company hoped it would be. In fact, HBO Now really isn’t making money for the company at this point.
Interestingly, the standalone streaming service isn’t exactly cheap. The service currently charges its users $14.99 a month for premium content (after those first 30 free days) and the business has been available since this April. In that time, 1.9 million customers have signed on with HBO Now, some of them in addition to cable (definitely not the “insane number” that was initially being tossed out). Those who have stuck with the service beyond the month of free episodes should be paying a pretty penny for the privilege. The reason HBO Now has not been a success yet has little to do with how much money it is bringing in, however. Instead, the cost of hiring out to produce the streaming service and then marketing that streaming service has cost more than that $21 million HBO Now has made thus far.
This week, Time Warner CFO Howard Averill revealed to analysts that while HBO Now is currently not profitable, the company feels it will be, given time. Averill had the following to say:
Our early experience suggests HBO Now will be a highly profitable revenue stream over time… [although it will] generate losses for the remainder of the year.
The thing that’s really concerning about this whole thing is that while HBO NOW has added new subscribers into the HBO family, Variety is noting that Averill also admitted that a lot of people who signed up for the 30-day trial did not end up sticking with the service over the long haul. One would expect some trial subscribers not to end up wanting the service longterm, but for Averill to say that’s a big reason HBO Now hasn’t made money yet is a bit more troubling.
Sometimes products take a little while to gain enough traction to make money. This doesn’t necessarily seem to be the problem with HBO Now, as revenue is coming in but then going back out again. Theoretically, as the service continues to require less and less marketing and pays back its debts, it should make money. But HBO’s experiment proves just how hard it can be to buy into and take over even a small portion of the streaming market. It makes what Netflix has done with original programming and making itself indispensable that much more impressive.