The AV Club Tackles TV, Digital Availability, And Piracy!

(image courtesy slowtrav)

Earlier today I was driving home from work and chatting with a friend of mine about “The Vampire Diaries”. I convinced her to start watching the first season via Netflix, and now she’s blown through seasons one and two and is totally hooked. Unfortunately, she’s coming into season 3 partway, and so Hulu and CWTV aren’t offering the early episodes. She’ll have to wait until the DVDs are released, likely at the end of this summer. We commiserated about how annoying it is that she can’t track down season 3 yet, and moved on…but I’ve been on both sides of this conversation where it’s been simply mind boggling that XYZ show wasn’t available, and how dumb is that…and yes, I’ve had friends who have shrugged and essentially said “Well, you can always watch it now for free if you know where to find it.”

This attitude has always driven me nuts. You can’t justify shoplifting because a store’s prices are too high, so complaining that you can’t get a television show or movie on demand from your streaming or download service of choice doesn’t justify piracy. But nothing sums up the reasons why piracy isn’t the answer better than the AV Club’s article, “Patience and Piracy: Why Helping Yourself Hurts Good TV” It asks, and then answers, the question of “Why CAN’T I get my favorite premium show digitally right away?” as well as explains why stealing it doesn’t help!

Essentially, the answer is that making shows costs money. Lots and lots of money. More money than Hulu, iTunes or Netflix can provide, especially in contrast with cable subscribers, advertising, and network subsidies all giving the “traditional” route a big economic boost for now:

The real fear for HBO is similar to the real fear for FX: If too many people start watching online (legally or illegally), then the network will lose the money it uses to develop the programming that makes HBO a must in many homes. HBO is the market leader because it’s developed a reputation for having the best, most cutting-edge programming on TV, programming that includes hits like Game Of Thrones, yes, but also far less-watched, riskier programming like Enlightened, Treme, and Luck. Unintentionally, HBO has boxed itself into a corner where it needs to keep following the old model—even if it increasingly makes less sense—if it wants to keep making the kinds of programming that made the old model work so well. The kind of shows HBO makes are expensive. Game Of Thrones costs, conservatively, around $5 million per episode, and that’s not including the costs from the pilot’s set construction, which are spread over the length of the production. The only way to find that kind of money continues to be in the subscriber model. There’s a reason HBO has been by far the network that acts most quickly to stop Internet piracy of its programming. If those shows are out there for free, it chips away at the whole business model.

Let’s do a bit of basic math. Earlier in the article the AV Club referenced 20 million subscribers to HBO, with a cost per subscriber of (roughly) $15/month. That’s $180/year, or $3.6 billion. Now, keep in mind how much of that goes to cable companies, as well as media companies for movie rights. So the actual amount to developing new shows is much smaller, but it’s still a nice cushion that allows them to try “Game of Thrones”, “True Blood”, and “The Sopranos”, and still stomach flops like “John from Cincinatti”.

Let’s say HBO decides to release a new show, “HBO’s download experiment” on iTunes only. It costs them the same as Game of Thrones per episode ($5 million) and they will be selling it for $5.00 an episode. HBO needs to sell 1.4 million episode downloads just to break even (since they lose $1.50 per episode to Apple). And if all they do is break even, there’s no more money to make new exciting shows.

That’s effectively what the AV Club concludes, though they use less math. Unfortunately they have no better solution, and can only urge patience over piracy. It may be painful to wait, but in my view they are correct. We have seen technology outpace business at an untenable rate, and the only thing to do is wait for the business side to catch up…that is, unless you want all the shows you watch in the future making an episode of “Charmed” look like cutting edge special effects!

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6 replies

  1. Well, one possible model (that people have been screaming for for a long time) is “a la carte” cable/satellite offerings. Don’t force customers to get Cinemax and Showtime and Fox News and Bloomberg Business Channel and MSNBC and all the rest when all they want is HBO (or whatever). During “Game of Thrones” last year, I would have been happy to pay some kind of subscription fee to be able to stream the episodes. $60 for a GoT package would have been way less than our (then) monthly cable bill, and I could have watched it streaming at the time of broadcast. Then charge an added fee for when the episodes are made available for ownership/download.

    I think it’s partially the length of the delay between broadcast and online availability that’s a problem. A few days or weeks is not that big a deal; but 6-9 months? Hard to encourage your audience to be patient for that long–front-line movies are coming out quicker than GoT has moved to iTunes, eg. And it’s irregular as well–“Top Gear” runs about 3 months behind the British broadcast, but HBO’s offerings take much longer to reach iTunes. Despite being made by many different studios, we all know a movie will be out on DVD 2-6 months after it’s in theaters. TV shows, it’s more unpredictable, and I think that’s problematic.

    • I don’t disagree with you that the length of the delay is unfortunate. But the AV Club’s point here is that as great as “a la carte” offerings would be, or faster downloadable options, is that it’s not possible to make money doing that, at least not consistently. If people paid for HBO JUST for GoT, then HBO wouldn’t have the revenue stream to also try “Luck”, “True Blood”, etc. These shows don’t exist in a vacuum, they exist to fund more than just their specific airing of their specific show. Even if HBO could break even on GoT, if they bleed subscribers whenever there’s not a guaranteed hit, then HBO never takes any risks on new shows, and then people complain that HBO doesn’t offer anything good anymore.

      What I thought was very interesting about the AV Club’s take was that they very astutely explained the problem for HBO is that they’re caught between a rock and a hard place. They want to be digital and mobile, but they need the traditional programming to fund programming, because a few million people buying off iTunes doesn’t cut it. THAT’s the problem, and that’s why they experiment with delays, give precedence to higher margin options like subscriptions and DVDs, etc. It’s just too damn expensive to write a quality TV show, pay the actors, create the sets, produce amazing special effects, and do it all while also trying to accommodate the “Well I want to watch on my iPad RIGHT NOW” crowd. 
      You need to compare apples to apples-“Top Gear” probably costs less for a whole season than GoT does for one episode.

      • Hm; what I got from the article was that they were simply advocating patience; that this is a tricky transition, and you shouldn’t give in to your baser instincts while the big media companies figure it out (if they ever do), and so should avail yourself of a little patience.  (While admitting that that’s particularly difficult for our Internet Generation–I know I have a heck of a time explaining to my son, as we’re walking out of a movie, why it will be 3-6 months before he can buy the DVD!)

        The AV article concludes: “So, yes, I’ll advocate patience, I think. HBO has been a force for good in the television world for almost two decades. I get why you’re cutting your cords, but isn’t it worth waiting a little while for a DVD in that case?”  In my experience, once you start arguing from a moral standpoint with regard to something like this, you’re in trouble.  Should people be patient?  Should they refrain from pirating in order to support the shows they love?  Should they do the right thing?  Of course!  They should also never exceed the speed limit, cut in line, tell lies, cheat on their partners, steal office supplies, jaywalk, run red lights, lie on their tax returns, and all the other immoral things that people end up doing anyway.

        The base problem (or so it seems to me), as I mentioned above, is twofold:  the length of time before something becomes available, and finding some way where people can pay enough of a premium (and be willing to) to ease the transition from “buy a cable package” to “a la carte”. The article says, “The reason the hero of the [Oatmeal] cartoon can’t watch Game Of Thrones legally yet is because the system set up to produce Game Of Thrones only works if there’s a window when people pay a premium to watch that content”.  They also note,  “I see someone in that Oatmeal cartoon who can’t wait a couple of weeks to see what he wants to see, but I also see a generation—my own—raised to find major media monoliths that are slow to get with the times incomprehensible, like radio broadcasters laughing off television in the late ’40s.”.  Both the pressure points I’m talking about are alluded to in those statements:

        1) The size of that “window”.  The problem is it’s not “a couple of weeks”; it’s “half a year or more”.  In an environment when you can get newly-released movies in 3-4 months, forcing the Internet Generation to wait 2-3 times that–when they’re used to immediate gratification–is a mug’s game.  It’s not going to work.  
        2) The definition of “pay a premium”.  I’m fine with paying for content.  I’m even fine with paying a premium, especially if it means getting quality content, getting it in a timely fashion, or (preferable) both.  But as the AV article points out, because of their current business model, HBO is trying to force people to subscribe to cable/satellite companies when the trend is clearly away from that.  HBO (and other providers) need to figure out a way to transition from that before it’s too late, because the trend is only going to accelerate.

        In the case of a program like GoT (or “Treme”, or “Luck”, or “Boardwalk Empire”, etc.), it seems to me that HBO/the cable/satellite companies have set the bar for watching (or complying with their restrictions, if you prefer) so high that, compared to the bar for pirating, they’re simply hurting themselves.  I know my situation is unusual, but consider:  Just for GoT, for its original run, I signed up for HBO with my satellite provider and got HBO Go–and that gave me a bill of near $100 a month (because HBO is only available as part of the “Premium” package, which was the next-to-most expensive one).  The only other person in my house watching TV at the time was my son, who just watched Cartoon Network and Nicleodeon.  So if we say that half the cost of my monthly bill was only for GoT (the only show I was watching on TV), I was paying $12.50 an episode–more than a first-run movie.  If anyone else is in a remotely similar situation, it’s no wonder that so many people are fleeing that model.

        I think until the media companies figure out how to accommodate the “I want it on my iPad NOW” crowd, they’re going to see a lot of piracy.  It may be wrong and immoral and doing damage to the companies that we want to encourage, but it’s going to happen in this environment.  Or so it seems to me.

        • So then what do you suggest? My understanding is that if it’s that expensive to produce a show, does HBO just not produce the show, do they cut the quality, or do they experiment with your suggestions, but not with an uber-expensive production like Game of Thrones? To be fair, I’ve never watched GoT, but the impression I get is that it’s extremely well done. So there’s a high production value associated with it.

          How would you feel if HBO piloted what you’re advocating but for “Boardwalk Empire” and “Luck” but not “Game of Thrones” or “True Blood”? Basically using their more budget-friendly shows for it…or if they did it with their original movies only? My question/point is that it’s not cheap or easy to simply flip a switch and change a business model, and if they do it slowly over time, will they get a positive result, or will they simply get their butts handed to them anyway because they didn’t do enough? And if that’s the case, why not just stick with the old model until the digital downloads market is stronger and more likely to produce real revenue?

          I’m just throwing ideas out here, and honestly I don’t know many specifics about how much HBO makes or how their revenue stream breaks down. But I think if you’ve been receiving subscription fees for 20+ years, it can’t be easy to suddenly say “Well, now we’re an a la carte download service too! This seems like a fine idea that won’t undermine the company at all.” A lot of this hinges on how high the demand really is for downloaded movies and television shows, and how much of it is all noise. Remember, they’d have to
          sell a huge chunk of content to make up for an annuitized subscription
          stream, and you really have to wonder if that many millions of people are
          lined up, iPads at the ready, or if it’s just a vocal minority. The numbers
          on cord cutters SOUND impressive, but at only 5% of households (

          it’s definitely a tiny slice.

          I’ll give you another idea of vocal minority. I have friends who will get
          up at 5am to go to someone’s house and watch rugby games. Does that mean
          ESPN is missing out by not airing rugby during prime time? I know other
          people who complain about track and field not being shown enough on tv.
          Does that mean NBC is a failure because they didn’t air the olympic trials
          live? Or is that we’re so ensconced in what we want that we convince
          ourselves that we’re a significant enough market to matter, even if the
          reality is that it’s just not worth it to ESPN to show rugby, and it’s a
          waste of Saturday morning programming pre-emption to air the Oly Trials
          live for the tiny percentage who will be watching live?

          I know I’ve rambled, but my point is, what we want doesn’t always make
          business sense, and businesses aren’t a charity. HBO may hate piracy, but
          that doesn’t mean the answer is to sacrifice their profits.

          • I don’t have any great answers, honestly; it’s a tough situation, and all the various answers are whack.  I tossed out some possibilities, and I think you’re right: some of them should at least be tried in a trial fashion when failure wouldn’t hurt as much.  So yeah, I’d *love* to see them do some experimenting with (say) “Luck”, or some similar show.  They could try:

            Allowing a subscription policy for people to view it on HBO Go during the initial run, and charge a premium–say, $3.99/episode.  Combine this with an advertising push–“If you order now, you can get the full run for a discount!”  Or, “Don’t have HBO?  Try one of our shows for only $50 during its initial run!”  Offer bonus material–interviews, behind the scenes stuff, and so on–for people who buy the full package.

            Go with a model similar to the various sports channels like Center Ice or Season Ticket–charge people for HBO only during the season of the show they want to watch.  Have different variations of HBO “subscribers”–let people add their subscription to the *basic* cable package instead of forcing them to buy a huge costly package.  So you subscribe to the “Boardwalk Empire” season for, I dunno, $50, and then when Boardwalk Empire is over, you lose your HBO service.  But while BE is running, you get the other HBO content, too, and maybe that sucks you in and you buy the full package.

            Offer HBO and HBO Go as an add-on to *any* level of programming, rather than forcing a “premium package” purchase.

            Cut down the amount of time between the first run and offering it online–make it one month after the end of the first run instead of 6-9.  Or offer a one-week delay package for a premium, and let viewers know that they can purchase the full run for less money if they just wait until the initial run is complete.  So, say, a one-week delay for $60 for the full run, but you only have to pay $30 if you don’t mind waiting until one month after the initial run.  

            I’m sure TV people can come up with more ideas; I’m just a tech writer, after all.  But I think some experimentation with “cheaper”, more economical shows is warranted.  If the Club AV folks are right, and current trends continue, HBO (and FX, and TNT, and other folks who create new content) *need to* experiment before, as the AV folks say, it’s simply too late.

            My two cents.


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