Question

HBO, a premium cable network, was priced at $14.99 before, but in 2015, its CEO announced that US households would have free access to HBO's popular shows and dramas on Apple devices without paying for a cable subscription. Some given conditions are the following:

In 2013, the US broadcast and cable TV industry generated revenue of $173 billion - $104B from subscription and the rest from advertising, with industry growth 6% annual.

The US cable TV and broadcast industry has a very complicated value chain, and the market for pay TV is fairly concentrated (with four companies taking 2/3 of the industry revenue).

The number of pay TV subscription declined greatly from 2009 to 2014, but providers managed to achieve modest rates of revenue growth. By contrast, internet-based video streaming services such as Netflix were adding subscribers for over 20% per year.

Consumers rely on smart TVs, media-streaming players (such as Apple TV) and game consoles to stream television shows and movies directly to their TV sets. These devices has a high penetration among 18 to 34 year olds. While TV sets remain dominant, other screens were gaining in popularity. Some reasons for viewing TV online: convenience, lack of commercials, the lower price compared to cable, and binge watching. Some younger viewers, especially, decided to cut the cord and cancel their cable subscriptions. By 2014, about 10M US households were without cable - half of those subscribed to streaming service. Younger demographic groups tended to watch fewer hours of traditional broadcast and cable TV.

Given the information, please explain and analyze five important reasons why HBO decided to offer its new service now.

Answer 1

The five important reasons based upon which HBP decided to offer its new services are as follows:

1. The craze of online streaming devices like Apple TV. These numbers are increasing highly and many of the content of HBO channel is shown on Apple TV and the number of viewers has increased.

2. The option of online video streaming through various subscriptions. The number of viewers is increasing at a high rate every year and have grabbed the largest market share.

3. Large number of cable users have ditched the cable channels and have opted for online video streaming options to view content with interruptions.

4. The option to view content with wasting time in viewing advertisements facilitates the viewers to incline towards the online streaming services. The content provided here is highly enjoyable and binge-watching is also available for people.

5. A large number of young viewers have opted for reduced their viewing time on cable channels and there is a high chance that cable the revenue generation from cable TVs will reduce.

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