HBO Streaming Service Not Cannibalizing Subs, Execs Say

Courtesy of HBO

HBO CEO Richard Plepler and Time Warner boss Jeff Bewkes laud the early reception, don't disclose sub figures and signal Bill Simmons would come to the standalone streaming service.

Time Warner's HBO launched its standalone streaming service HBO Now in the second quarter, but subscription revenue didn't get a major boost in the period, management said Wednesday.

"We anticipate HBO Now will be a more material contributor to subscription revenue growth over time," said CFO Howard Averill on an earnings conference call. "We are pleased with the initial consumer response to the service, but we saw only a modest benefit to the sub revenue in the second quarter due to the 30-day free trial period for new subscribers."

He added that in the third quarter, "we expect to benefit from a full quarter of paying subs on HBO Now." He didn't provide detailed forecasts, but added that the service would become a "more meaningful" contributor later in the year.

"We are extremely pleased with how well it has been received," Time Warner chairman and CEO Jeffrey Bewkes said on the call, highlighting that it was the top-grossing entertainment app on iTunes in May and June. He added that the firm would bring HBO Now to additional platforms and "more traditional distribution partners."

HBO CEO Richard Plepler said later on the call that the company has so far seen less than 1 percent of HBO subscribers leave the pay TV bundle to take HBO Now. He said HBO Now would be "very profitable in the coming quarters."

The company didn't detail HBO Now subscribers or conversion rates from the free trial.

"Everything we are seeing, both from sampling and from subscriber satisfaction has exceeded our expectations," Plepler said.

Said Bewkes: "We are already investing in additional programming to support the service." For example, sports expert Bill Simmons, the former ESPN and Grantland contributor, recently struck a multiyear and multiplatform deal with HBO. He "will be particularly appealing for consumers in an on-demand environment," Bewkes said, without providing further details.

In terms of creatives, Bewkes said there were indications that "HBO Go and HBO Now have made the service an even more attractive outlet, and you will see additional announcements demonstrating that in the coming months."

Plepler also signaled the premium TV service could launch further OTT services in various parts of the world depending on where they make financial and strategic sense.

Averill also said that Warner Bros. was on record for a record year in terms of adjusted operating income.

And Turner CEO John Martin answered questions about concerns regarding U.S. pay TV subscriber declines. "We’ve seen some modest declines in the U.S.," he said, but added, "we have not seen any acceleration in the declines." He said Turner's affiliate fee growth expectations remain on track. 

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