Editor's Corner—How HBO Now's subscriber surge reshapes the SVOD story

Ben Munson

HBO Now has reportedly surpassed 5 million subscribers, effectively tripling its previous annual rate of subscriber growth. How did the standalone streaming service manage it, and can its competitors keep pace?

According to Bloomberg, in the span of about one year, HBO Now moved from 2 million subscribers to 5 million subscribers. The report cites unnamed sources who attribute the explosive growth to inclusion in Amazon Channels and virtual MVPDs like DirecTV Now.

HBO Now launched in March 2015 and by the time March 2016 rolled around, the service was nearing 1 million subscribers. Roughly one year later in February 2017, HBO Now was sitting on 2 million subscribers. Now about one year after that, HBO Now has exploded to 5 million subscribers.

For context, Showtime OTT, which launched July 2015, and CBS All Access, which launched in October 2014, were on pace to have more than 4 million subscribers combined by the end of 2017. The services expect to have a combined 8 million subscribers by 2020.

Thus, it's clear HBO Now enjoyed a radical acceleration in subscriber growth last year, particularly as it compares with competitors like Showtime and CBS All Access. It deserves a closer look.

Bloomberg's report on HBO Now attributes its growth in part to DirecTV Now; that vMVPD has been growing a subscriber base that could support additional growth for premium channel add-ons. During its latest quarter, AT&T said that DirecTV Now added 368,000 subscribers and now totals 1.2 million subscribers. But it’s worth noting that DirecTV satellite and AT&T U-verse lost a combined 207,000 U.S. customers during the quarter, and it’s unclear how many of those subscribers dropped traditional TV service (along with any linear premium channels) in favor of a less expensive DirecTV Now.

Of course, Showtime OTT is also available as an add-on from DirecTV Now but, whereas HBO Now was an option for DirecTV Now subscribers since the vMVPD launched in late 2016, CBS and its networks including Showtime held out and didn’t reach a deal with DirecTV Now until August 2017. So that could be a reason Showtime OTT didn’t get the same subscriber boost.

Another reason cited for HBO Now’s big subscriber year is Amazon Channels, the company’s unified video service hub. Fellow premium channels like Starz have been candid about giving credit to Amazon for their OTT subscriber growth.

“The third season of ‘Power’ established a Starz record for viewership, surpassing 7.3 million multiplatform viewers per episode, and helping nearly drive OTT subscriptions close to the 1 million mark,” said Starz CEO Chris Albrecht in 2016. “The strong performance of our Amazon and Starz app initiatives complements the Starz Networks business with core distributors.”

Indeed, BTIG analyst Rich Greenfield last year estimated that HBO, Showtime and Starz were all adding loads of subscribers thanks to Amazon Channels.

The apparent growth opportunities afforded to streaming services by Amazon Channels could explain the logic behind CBS All Access joining service earlier this year.

But Showtime OTT has been down with Amazon ever since the launch of the Streaming Partners Program in 2015 and it seemingly hasn’t received the same subscriber boost as HBO, assuming that Showtime has roughly 2 million subscribers, or about half of what it and All Access ended 2017 with on a combined basis.

Another reason cited in the report for HBO Now’s growth has been HBO programming like “Game of Thrones” maintaining a strong audience and new series like “Big Little Lies” gaining traction along with awards season prestige. But in 2017, CBS All Access had its own high-profile original series with “Star Trek: Discovery” and Showtime OTT did as well with the revival of “Twin Peaks.”

Despite the growth trajectories for services like HBO Now and Showtime OTT, the U.S. SVOD hierarchy remains intact: Netflix, Amazon and Hulu are the big three. Netflix now has 54.75 million U.S. subscribers, Amazon has more than 90 million subscribers (though it’s unclear how many actually watch Amazon Prime Video), and Hulu just hit 17 million subscribers.

But HBO Now, by reportedly hitting 5 million subscribers, has set itself apart and ahead of the rest of the pack. What’s less clear is what HBO’s competitors can do to keep pace, particularly when it seems that they are doing much of the same things but not getting the same results.—Ben | @fierce_video