HBO streem 2014 (contagious) by Santiago Duran

Switched-On TV HBO is the most creatively successful pay TV channel in the US. Its genre-defying, complex, lavish, original shows, from The Sopranos to Game of Thrones, alongside technological innovations in content marketing and fan engagement, have helped redefine TV over the last four decades May 15, 2012

But as competition from other pay TV channels intensifies, and streaming platforms jeopardise the traditional subscription-led cable TV model where revenues rely on audiences, not advertising, HBO is having to prove its value more than ever.

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‘Everything else is TV. We’re different,’ says HBO co-president Eric Kessler. Whether it’s The Sopranos, The Wire, Sex and the City or True Blood, HBO’s trademark genre-busting shows have exerted an influence on the TV culture zeitgeist like no other. Synonymous with exemplary writing, high production values, originality (and lashings of gore, sex and bad language), over the last 20 years Time Warner-owned HBO has become the second largest of the US premium pay TV networks, piped into 29 million homes (about 105 million American households pay for cable TV) by telco, satellite or cable distributors.

The creative side of Home Box Office was a slow starter, known best early on for schlocky fare like Tales from the Crypt. Then, before on-demand movies, the channel was truer to its name, debuting fresher uncensored cinema content than ‘basic cable’ packages. That changed in 1992 when it aired comedy The Larry Sanders Show, its flagship for most of the decade. Critics raved, and the channel was emboldened to define itself as a risk taker, starting an extraordinary streak of daring properties. Sex and the City followed in 1998, The Sopranos in 1999, then The Wire in 2002. A fallow patch followed as these cult shows ended and hopefuls like Deadwood and Rome failed to pick up interest. Lately, however, the channel has been back on form: True Blood in 2008, Boardwalk Empire in 2009 and Game of Thrones last year have all picked up millions of viewers and considerable praise. Mini-series like John Adams and Generation Kill cemented its reputation. And the winner is… / Creativity pays dividends HBO’s popularity is matched, and indeed helped, by critical acclaim. In 2011, for the tenth straight year, HBO received more prime-time Emmys than any other network, shortlisted for 104 awards in total, winning 19. Flipping traditional notions of creativity as a loss leader, it’s a financially successful model too. Although Time Warner doesn’t break out financials for HBO alone, analyst firm SNL Kagan said HBO turned over about $4bn in 2010, accounting for fully a quarter of the parent company’s operating profit of $4.5bn. We have to live up to the best programming on earth – David Lubars, BBDO New York Creativity pays dividends in other ways too: Hollywood wants its films on HBO, and its top talent, including Aaron Sorkin (The West Wing, The Social Network), David Simon (The Wire), Alan Ball (Six Feet Under, True Blood) and Armando Iannucci (The Thick of It, In the Loop), is excited to work on richly complex TV shows. HBO’s epic dramas come with budgets that are a draw too: the first series of Game of Thrones cost an enormous $60m, for example. It’s not marketing. It’s HBO marketing HBO’s programming has defined its approach to marketing. As it launched The Sopranos and Sex and the City in the mid-nineties, it started to invest heavily in

marketing the HBO brand and shows in ways unlike its competitors. ‘The remit is the work you do has to be as good as the work we do,’ explains BBDO, New York chairman and chief creative officer David Lubars. ‘We have to live up to the best TV programming on earth.’ While broadcast and basic cable channels marketed using stereotypical advertising, HBO made ads that looked and felt as premium as its programming. ‘We don’t have as much content as broadcast networks, so we took a different approach,’ recalls Kessler. ‘We wanted to make every show look and feel like an event.’

As its shows gained public and critical traction HBO hired top photographers including Annie Leibovitz to capture cinematic, high-concept photo shoots of The Sopranos cast, placed in leading consumer publications using top quality paper stock. That focus on uncompromising creativity, lavish production value and premium placement led HBO’s agency of record, BBDO New York, to introduce the tagline ‘It’s not TV. It’s HBO’ back in 1996. A TV ad that year, Chimps, showed primatologist Jane Goodall observing chimps speaking lines from famous films including Star Wars and Forrest Gump, learned, it turns out, from watching her TV. Digital evolution / Voyeur, Imagine, ‘Eventising’ Entering the mid-noughties, as digital, mobile and Facebook changed media

channels and consumption habits, so HBO’s marketing adapted. In 2007 the station needed to remind people of the HBO brand while they waited for new programming. BBDO and production company Big Spaceship took advantage of new technology to create an ambitious, ambiguous thriller called HBO Voyeur, in the vein of Hitchcock’s Rear Window. Lusciously shot, the plot of a dark, violent drama across eight rooms played out as a projection on a New York building, and online on a special microsite, winning Grand Prix in Outdoor and Promo and Activation at the Cannes Lions festival the following year.

The agency followed that with HBO Imagine, a public cube installation across which the same story told from four different perspectives was projected. Online, the story played out across 41 bits of content, representing the complexity and depth of the channel’s programming. Big, experiential installations created by agency Civic Entertainment Group have ‘eventised’ HBO’s shows, including, in 2011, a vintage New York Subway Train for Boardwalk Empire, and a food truck in New York with Medieval-esque food from celebrity chef Tom Colichio for Game of Thrones. ‘We want our marketing tactics to generate buzz, earned media and ultimately be amplified to the national level,’ explains Zach Enterlin, HBO’s SVP of program marketing. The brand has expanded into social media and mobile campaigns, two-screen experiences, virtual check-ins and more to match the relentless pace of technological evolution. But the central strategy remains the same in its programming and its marketing: create stories that get people talking.

Call it the watercooler effect. ‘In digital, that Monday morning feeling happens 24/7,’ explains Alison Moore, HBO’s head of digital platforms. ‘Anything [our digital channels] do to increase value is a win, because it’s all about increasing value back to the subscription.’ Because you’re worth it / Passion engagement HBO’s mandate for bigger creative risks in its programming – bloodier, sexier, slower-burning drama – comes from a special set of circumstances that also extend into its marketing. ‘The big thing about premium programming is that because we’re not adsupported, we don’t have to focus on ratings,’ explains Kessler. ‘What we look at with shows is passion engagement.’ But a singular, subscriber-centric focus brings its own set of pressures. Consumers can only buy it on top of a bundle of other cable channels (roughly $85 a month for Comcast). It’s far more expensive than on-demand streaming services like Netflix ($7.99 a month). Customers can cancel it any time, which means HBO viewers make a monthly decision about whether to subscribe or not.

HBO’s marketing and technological innovations are therefore a constant effort to extend the life cycle of the consumer. It has to show subscribers the value they’re getting, and use social and digital tools to actually add more, and innovate to drive people to watch its content more simply, more conveniently and more often. And it has to get people to care more about shows, so they don’t unsubscribe. Choice, control, convenience / Technological firsts ‘We have to be sure that we’re not only creating the content our subscribers want, but we’re delivering in the ways they want to view it,’ says Kessler. ‘So what we have done historically is embrace new technology to give our subscribers greater access to the content.’ In 1975 HBO was the first TV network to continuously deliver signals via satellite to show the legendary Thrilla in Manila boxing match. In 1991 it introduced multiplexing – airing the same film or episode time-staggered across different channels. In 2002 it introduced HBO On Demand, letting subscribers view 150 hours of content whenever they wanted. Its latest innovation to expand ‘choice, convenience, and control’, as Kessler puts it, is HBO Go, launched in 2010. Created by interactive agency Huge, New York, responsible for large sections of digital for the channel, the app lets existing HBO subscribers stream 1,400 hours of content on any device they like. HBO Go / Discovery channel

HBO has taken its premium, differentiated user-centric approach into the delivery and discovery of its content online. Traditional TV channel websites are based on the one big bet – they generally show off their hit show for the season on the homepage, at the expense of making everything else less accessible.

HBO does the opposite. Huge created the HBO app’s exploding carousel to visually show off not one show, but HBO’s deep back catalogue, explains Huge’s director of strategy, Gene Liebel. ‘Every month a surprisingly high number of people unsubscribe from HBO. And the way to counter that is to have one person in that household discover one new series. That’s the thing we’ve been able to do.’ What we have done historically is embrace new technology to give our subscribers greater access to the content – Eric Kessler, HBO Although the channel says it’s too early to judge whether HBO Go has made people more likely to keep subscribing, Credit Suisse analyst Spencer Wang has predicted that it will cut ‘churn’ (the rate at which people unsubscribe) by 10%. In user experience terms, the app has been a spectacular success. It was downloaded one million times in the week after launch, and six and a half million times to date. Importantly, HBO’s surveys show that 85% of subscribers are watching more content because of it. Building the base / True Blood season one

But while HBO Go has pioneered driving physical access and content discovery, the brand has broken new ground in marketing its shows, too. When Alan Ballâ&#x20AC;&#x2122;s new vampire drama True Blood was due to air in 2008, HBO worked with Campfire, New York to bring the idea of vampires living among us to life.

The agency sent bloggers a cryptic missive that led them to live web chats with vampires, to access a hidden site called the Revenant Ones where the undead were discussing whether to reveal themselves. Fictional news reports, advocacy rally footage, documentaries about the Japanese artificial blood substitute True Blood, as well as posters for the product built up an elaborate, credible interactive world for would-be fans to dig deep into the show before anything had aired. The New York Times called the campaign the most extensive HBO had ever conceived, and was just part of widespread earned media coverage. Results reflected that: 30,000 forum posts were logged, and 1.5 million page views. 5.9 million viewers watched video content during the campaign, amounting to a total of 50,000 hours, which saw the series premiere draw in 6.6 million viewers.

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‘We immersed people in the world,’ explains Enterlin. ‘It allowed us to build a campaign that allowed fans to dive in and start that idea of evangelizing before the show even aired.’ Off air, online / HBO Connect, Game of Thrones While traditionally programme marketing has ramped up with big TV commercial buys in the weeks before premiere to drive tune-in, between seasons HBO’s marketing moves strategically from awareness and community-building to deepening fan engagement online. ‘Now, because of social media, people are engaged in discussion about your programming through the entire run of your show and even when the show is not on air,’ says Kessler. To capitalise on that, HBO has invested in new platforms like social chatter aggregator and visualiser HBO Connect, built by LA-based interactive agency RED and launched in May 2011. Split into five areas – Pulse, Feed, Visualizers, Conversations and Connections – the app acts as a central hub for all online chatter about HBO programming.

But it’s central to HBO’s marketing efforts too. HBO’s programming spawns unusually rabid fans, and it’s not been afraid to test the boundaries. After successfully building a fanbase for Game of Thrones’s first season, Campfire was called in to build excitement around the season two premiere. Viewers were urged via YouTube and Twitter to pledge their allegiance to the five warring families, and send films via Facebook to friends to do the same. Finally, 50 fans were challenged to pledge their allegiance permanently, with a sigil tattoo based on designs from the show from leading artist Ami James. Now, because of social media, people are engaged in discussion about your programming through the entire run of your show and even when the show is not on air – Eric Kessler, HBO Season two premiered to a series high of 3.9 million viewers, a 74% improvement on the first season premiere, 53% higher than the season average and 27% more than last season’s finale. ‘In the early stages of a show, tools like [the films] can help reduce any barriers for anyone to join the show,’ explains Enterlin. ‘You’re turning fans into broadcasters, providing content they can syndicate and distribute and retweet and get into their news feeds.’ Atypical stories / Narcissism and interactivity Like many show creators and broadcasters, HBO’s digital and social marketing efforts mean it has gathered millions of fans to its Facebook pages, but its broader strategy in social is atypical. Rather than simply using social as a broadcast channel

for repurposed clips, its strategy is to engage fans with unique content and interactive utility specifically tailored for the space. Building on that fan-as-broadcaster approach, it has launched work that uses the social graph to tell user-centred stories that leverage narcissism to get their messaging out. True Blood’s writers worked with digital production company Definition 6, Atlanta, to pen and shoot an interactive, personalised Facebook trailer for the fourth series. The app scrapes your social graph, using photos and friends’ names, for example, as the basis for a mysterious adventure in which you’re enlisted as an assassin by vampires, all set in True Blood’s town of Bon Temps.

Tasked with marketing box sets, BBDO also turned to technology to personalise the personal, emotional transformation of watching the show on DVD with Live Feed. Viewers simply put the DVD into web-connected blu-ray players. They then linked that to their Facebook page; as they watched, their profile photo physically changed to get more vampiric, posting status updates on their behalf and even gifts. Rewarding the digital diehard / Dig Deeper HBO has also innovated in how it rewards fan loyalty in digital. It’s thinking further than simply sending show swag, instead creating digital representations of fandom, virtual gifts and social utility that are sharable, postable and therefore act as

marketing tools in their own right. To build buzz for True Blood season three DVD release, BBDO released Dig Deeper, an interactive film featuring 60 clues from the season which fans had to uncover for a chance to win virtual badges to share on Facebook, and special True Blood goodies. The campaign helped HBO sell 550,000 DVDS for season three and more than a million for all three seasons. Two screen culture / GetGlue and Miso Tapping the rise of two-screen viewing and virtual content check-ins, in 2010 HBO teamed up with mobile, social TV app GetGlue to give people who checked into True Blood discounts on real products in the HBO store: 10% off for fans, but 20% off for those with more True Blood fan status on GetGlue. A similar tie-up for Game of Thrones season two this year received 90,000 virtual check-ins (Mad Men’s season five premiere, by contrast, received just 22,000), while social TV measurement company Bluefin recorded over 60,000 comments about the show. Unlike other streaming services which are basically aggregators, HBO is a content creator – Eric Kessler, HBO HBO also rewarded fans with their very own 15mb of fame using owned media. Fans were invited to tweet their description of the show using the #GOT140 and #GOTDay hashtags via HBO Connect. These were then featured within commercials on HBO. ‘We had so many GetGlue check-ins on premiere night we crashed GetGlue,’ said Sabrina Caluori, VP of social media and performance marketing. ‘According to Trendrr our social TV promotions (#GOT140, #GOTDay, GetGlue etc) accounted for over 50% of the conversations on premiere night.’ TV shows have traditionally kept fan interaction with shows to the tokenistic (‘Vote now!’). HBO is experimenting with tech partners to co-create content with its superfans: earning value, not just earning media.

The channel teamed up with two-screen mobile app Miso to let people add a layer of commentary onto the show through a tablet or smartphone with a custom platform called a SideShow. While watching an episode they could stop the action at any scene on their phone or tablet and annotate it which would then be shared with other Miso users. Fans could then vote on the best three SideShows for each episode, with the authors winning Game of Thrones merchandise and the officially designated SideShow for HBO promoted on Miso. Not only did the campaign encourage fans to rewatch episodes to add or read SideShows, but it helped new viewers better understand the world of Westeros, all for no further editorial outlay by the brand. Enhanced content / New entertainment experiences Beyond HBO’s considerable efforts in promoting shows, the brand is experimenting with the evolution of TV, creating richer content experiences that can differentiate it with a unique competitive advantage. ‘Unlike other streaming services which are basically aggregators, HBO is a content creator,’ adds Kessler. ‘What we think is a great opportunity is to marry our content creation skills with these new technology platforms to create new entertainment experiences.’ That marrying of content with marketing, distribution and interactivity is written into HBO’s creative process from the earliest stages, says Moore. ‘HBO’s history

with the runners and the writers and the creative community has been a really tight alliance. At the start of production, we ideate around what we’re going to do [digitally]. What are the cycles of engagement through Facebook, YouTube, Connect, HBO.com that keep viewers engaged through to episode 10?’ Game of Thrones’s cult, rabid following has acted as a petri dish for what the future of these enhanced content experiences might look like. Promoting the second series, which launched in April 2012, HBO created an interactive viewing experience. Viewers watching an episode streaming on tablet or computer can stop the show by clicking on a small, unobtrusive prompt. That brings up extra content for example interviews with the actors and show creators and an interactive map of the kingdom of Westeros. Kessler says that around half of the show’s viewers are using the tools, often to rewatch episodes, and audiences can expect more of these types of enhanced watching experiences for other shows. Bundles, but not of joy / The rise of Netflix Just as HBO’s distinctive premium shows and technological innovation has shaped its past, it’s betting on HBO Go and HBO Connect and category-defying marketing to shape its future. Although it’s continuing to invest heavily in original programming, HBO is in a gilded cage, trapped on the wrong side of a slow cultural shift from costly, wasteful bundled broadcast cable deals to cheaper, à la carte streaming content online from burgeoning companies like Netflix. But it reaps huge rewards from its deals with distributors that make cutting the cord simply not financially worthwhile – for now at least, says Kessler. And the next generation of potential HBO subscribers are a problem. Young people don’t watch as much TV as their parents, they prefer to watch it through their laptop, they have less disposable income, and they’re less loyal to brands, according to research from Boston Consulting Group.

That said, HBO’s back catalogue, its brand and now its head start in the ‘TV everywhere’ sphere means it’s at a considerable advantage. And despite flat subscriber figures in the US (it added just 200,000 over the year) its international growth is big, due to content deals with the likes of BSkyB, which launched Sky Atlantic in the UK to show HBO content. Subscribers grew by 25% in 2011 to a total of 53 million outside the US and revenues have increased 50% over the past three years. Plus, there aren’t the legacy deals with distributors and so potentially scope for experimentation with selling direct to consumers via streaming. Overall, therefore, it’s in rude health. In its April earnings call to analysts, Time Warner’s chief financial officer John Martin said revenue from HBO and Turner Broadcasting rose 14% to $3.3bn in Q4 2011, helping drive the company’s biggest ever quarter. Recreating the station for digital People will figure out how to make their version of HBO Go to bring TV to more platforms, says Huge’s Liebel. But by leveraging its relationships with showrunners and creators, and integrating social, interactive, and two-screen into the ideation, production and viewing experience, HBO is aiming for something new. ‘It feels like recreating the station for digital, finally,’ he says. ‘How do we take those interfaces that connect the consumer to the content, and apply that to our programming?’ says Kessler. ‘We think there’s an opportunity to create new entertainment experiences. We’re in the nascent stages of creating this

type of programming. It’s going to be very exciting to see this develop.’ Everything else is TV. HBO is different

CONTAGIOUS INSIGHT / HBO / BY CHRISTOPHER MARANGI HBO possesses an enviable business model: with minimal investment and significant pricing power, it collects a recurring cash flow stream from its distributors on behalf of consumers. This was not achieved overnight; the company has spent more than 35 years enhancing its value to consumers through a wellhoned mix of original content, sports and movies and technological innovations such as HBO Go. Other premium networks such as Showtime and Starz have been late in adopting HBO’s model, leaving the network with plenty of time to establish itself as the pre-eminent pay-TV brand with the subscribers and revenue to back it up. While the US operations have matured into a cash cow that puts it amongst the most valuable networks in the world, significant growth opportunities remain abroad. But HBO presents a paradox for investors: on one hand, the strength of HBO’s brand makes it an ideal candidate for an over-the-top or direct-to-consumer video service; on the other, it may have the most to lose from a breakdown of the current distribution system. HBO is indeed a vital cog in that ecosystem. It provides a reliable revenue window for content (mainly film) owners and a differentiated product for cable and satellite distributors. Those relationships are not without tension, however. Content owners have an increasing array of options to reach

consumers. Distributors are wary of building an eventual competitor to their service and may find it more lucrative to pitch high margin broadband or other services compared to premium networks. An acceleration of so-called cord-cutting could be abetted by networks such as HBO, but trying to bypass traditional distribution would likely leave all existing players worse off. Ultimately, the status quo is optimal. Despite its marketing claim ‘It’s not TV, it’s HBO,’ the fate of the network appears inextricably tied to the fate of television as we know it. Christopher Marangi, portfolio manager, GAMCO Investors, New York www.gabelli.com CHALLENGE / SOLUTION / RESULTS / HBO / CHALLENGE / Despite a history of differentiation through premium content and technological firsts, 40-year-old premium TV channel HBO has started to face competition from rival channels like AMC and Starz, which started investing in high-quality programming five years ago. At the same time people are beginning to watch more streaming, on-demand content from services like Netflix, which are cheaper. HBO’s marketing and business challenge is to boost access, loyalty and engagement to constantly assert its value to subscribers against a variety of cheaper, increasingly compelling alternatives. SOLUTION / Since the late nineties , HBO’s marketing has ‘eventised’ its shows, with high-production value photo shoots from Annie Leibovitz for the The Sopranos, lavish, complex brand installations like HBO Voyeur and branded experiences such as a food truck for Game of Thrones. Recently, it’s engaging fans with integrated campaigns and personalised Facebook films for True Blood, and rewarding Game of Thrones fans for virtual check-ins on two-screen app GetGlue with virtual points, badges and HBO store discounts. But it’s also evolving the TV experience, offering social layers, extra content and developing technological innovations to add more value to its content and differentiate itself. RESULTS / Engaging with fans through its marketing and HBO Connect, and boosting access via HBO Go has seen HBO weather the recession reasonably well – a real achievement for a premium service. HBO’s subscribers have been relatively flat in recent years: it’s gained just 200,000 new subscriptions in 2011 to reach 29 million in the US. But it’s very profitable: Time Warner doesn’t reveal HBO’s results, but SNL Kagan estimated it made $4bn in 2010 and accounted for a quarter of its parent company’s operating profits of $4.5bn. Internationally too it’s grown

its subscriber base by 25% in 2011, to 53 million.

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