Analyst: HBO Go is 'HBO On Demand on Steroids'

10:25 AM PST 04/21/2011 by Georg Szalai

Morgan Stanley's Benjamin Swinburne says the digital on-demand service could reduce user turnover and potentially even help increase HBO's subscriber base.

NEW YORK - HBO Go, the new service that allows HBO subscribers to access loads of HBO content on any device at any time, should make investors in parent company Time Warner more comfortable about the premium TV service's continued growth and outlook, Morgan Stanley analyst Benjamin Swinburne said Thursday.

"Investor concerns over the long-term growth and profitability of HBO has weighed on TW's valuation," he explained in a report Thursday. "Ultimately, Go is aimed at increasing the lifetime value of an HBO customer by reducing churn and potentially increasing the customer base beyond the 30 million that pay for HBO today."

HBO will contribute about 25 percent of TW's 2011 operating income before depreciation and amortization, he estimated.

"This product rollout is significant for HBO, for its parent Time Warner and for the broader media landscape," said Swinburne, calling HBO Go "traditional HBO On Demand on steroids." HBO On Demand is the company's on-demand system on TV screens in telecom, cable and satellite TV homes.

Beyond computers, HBO Go will come to mobile devices, including the iPhone, iPad and Android mobile devices on May 2.

"Roughly 50% of HBO original series DVD purchases tend to come from non-HBO subs that will not have Go access," Swinburne also highlighted in suggesting that offering more  content in digital form may not cannibalize prior-season DVD sales. "But perhaps more importantly, the DVD risk was deemed worth it for the potential upside associated with a robust Go product that could drive subscriber growth and a firm grasp of where the industry is headed - which is more digital and less physical."

 

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