HBO Go-It-Alone: There Goes the Cable Bundle?

HBO CEO Richard Plepler announced today that the company will launch a "stand-alone, over-the-top HBO service in the United States" in 2015. That means that you will soon be able to add HBO to the list of television you buy without a cable subscription, including Netflix, Hulu Plus, Amazon Prime, and NBA League Pass.

This marks a tantalizing development for millions of households without cable (and who, for whatever reason, weren't already borrowing HBO Go passwords from friends and family). Does it also mark the beginning of the end of the cable bundle?

There are three ways to gauge the impact of HBO "Go-It-Alone" on the TV industry:

It seems that the audience most likely to pick up an HBO "Go-It-Alone" product today are mostly the young, lower-income Internet-savvy viewers who weren't cable customers, anyway. That suggests that HBO Go-It-Alone will restrain cable's growth by preventing new sign-ups, rather than hurt cable by creating more cord-cutters.

But that's bad enough. The cable empire is ridiculously profitable, and both the networks and the cable companies have an interest in keeping the gravy train on the tracks. But that empire is shrinking. Last year, cable lost 166,000 subscribers, the first annual decline ever. Meanwhile, hundreds of thousands of other households are downgrading to basic cable services that leave off popular channels like ESPN.

In interviews, cable executives often explain the pathetic growth in new cable subscriptions by pointing out that the economy is still weak (it is), and young people are forming households at a historically low rate (they are), and when they get a job and get married, subscription growth will bounce back (it might). But the "mini-bundle" of Netflix, HBO Go-It-Alone, and Hulu is getting better and better while the "mega-bundle" of cable is getting more expensive. Maybe millions of these Internet-only households, having lived happily for years without live TV, will decide that the Internet's mini-bundle is good enough, forever.

You'll notice that these paragraphs have a lot of future-tense verbs and maybe's. That's because the press doesn't have any more details on what a stand-alone HBO will look like. Nobody knows if it will be live HBO channel, or just a limited library of old shows, or just the fourth season of Arli$$. Without a good understanding of the product, it's way too early to make any predictions about its impact on cable subscriptions.

The irony is that if HBO Go-It-Alone succeeds in expanding both audience and profit for its parent company Time Warner, it will inspire copy-cats. And if you have enough copy-cats experimenting with stand-alone products, the mini-bundle cobbled together among Internet TV options will get bigger, while subscriptions to cable's mega-bundle will shrink, threatening the profits of ... companies like Time Warner.

Cable television is still a massively lucrative business, Netflix is growing like gangbusters, and HBO thinks it can have its cake and eat it, too. For a few years, maybe it can. But if every channel tried to sell an Internet product, many would find that the audience willing to pay for their channel alone would be much smaller than the audience that slipped into their channel off the TV Menu. Bundling has worked. Now it's ending. Somebody has to lose this game.