HBO Go and The Innovator's Dilemma

Moneybox
A blog about business and economics.
June 7 2012 9:54 AM

HBO Go and The Innovator's Dilemma

HBO is a subscription television service. You pay for cable, then you pay more money and you get HBO. Nowadays, if you pay for cable and you pay for HBO you also get to use an HBO Go app that lets you stream HBO shows. So a lot of fans of True Blood or Game of Thrones who don't have cable subscriptions are wondering why HBO won't sell a standalone HBO Go subscription.

The answer, as many have pointed out, is that HBO is just one small member of a broader Time-Warner firmament and it has much more interest in sustaining that entire ecosystem than in picking up a few extra HBO Go subscribers. Still, a lot of the pushback against the standalone HBO Go idea has just rested too comfortably on that point. What we're seeing is a great illustration of Clayton Cristensen's themes in The Innovator's Dilemma.

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HBO is a major business model and creative innovator in the television industry. In the days of three network television, optimal strategy was to aim for a broad and shallow audience of marginally attached viewers and sell ads to them. But as there's less and less scarcity in the distribution channel, trying to appeal to intense fans of your content and directly sell to them makes more and more sense. Since HBO pioneered a version of this model in the 1980s and perfected it with hits like The Sopranos and Sex and the City they should be ideally positioned to take advantage of the way the Internet is even further eroding distribution channel scarcity. But instead precisely because they were so far ahead of the curve they're enmeshed in this larger ecosystem. Now they're left to sacrifice revenue for the sake of sustaining other corporate partners and different divisions of the company. It may be the right choice, all things considered, but it's an awkward place to be in. Someone with less to lose than HBO will start doing what HBO won't and they'll be in an awkward position.


Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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