HBO Now? More Like HBO Later. Over-the-Top Service Slower to Catch On Than Predictions

800,000 Subscribers Have Signed Up Since April

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Kit Harington as Jon Snow on 'Game of Thrones.'
Kit Harington as Jon Snow on 'Game of Thrones.' Credit: Helen Sloan/Courtesy of HBO

The introduction of HBO Now last spring may have marked a "transformative moment" for the premium cable network, but thus far consumer demand for the service has been somewhat underwhelming.

Speaking to analysts during parent company Time Warner's fourth quarter earnings call, HBO CEO Richard Plepler on Wednesday disclosed that some 800,000 subscribers signed on for HBO Now between April 7 and Dec. 31. And while that tally fell short of Wall Street's ongoing attempts at doing a head count, Mr. Plepler argued that HBO's untethered offering is still in early innings.

"I wouldn't say only 800,000 HBO Now subs," Mr. Plepler said, in a rejoinder to an analyst who placed significant emphasis on the word "only." "We're just getting started."

If adoption rates for HBO Now aren't meeting analysts' projections -- last summer, MoffettNathanson media analyst Michael Nathanson estimated that the service had already attracted anywhere between 970,000 and 1.9 million subs -- there are some extenuating circumstances to bear in mind. For one thing, HBO Now in its first three months was available exclusively to Apple OS devices, thereby shutting out would-be customers on all other platforms. Moreover, HBO Now has yet to make its way to Playstation and Xbox consoles, which Mr. Plepler said account for 20% of all usage of the HBO Go on-demand app.

To Mr. Nathanson's credit, he tempered his July 31 projections with a rather unambiguous disclaimer. ("Of course, we are the first ones to admit that these estimates are very rough and only should be used as ballpark numbers.") But HBO is shy of some other analysts' expectations as well.

Mr. Plepler said that HBO would redouble its efforts to draw more over-the-top subscriptions. "I think we're going to make a lot of progress as we put new content on and get on to more platforms," he said, adding that pay-TV companies and internet service providers are "very excited" about HBO Now.

HBO is encouraging cable and satellite companies to market HBO Now as they see fit, Mr. Plepler said. "Listen, if they want to sell HBO through skinny bundles, fantastic," he said. "Nobody's doing us any favors selling HBO. They're growing their business by using our brand. If they want to sell HBO through triple plays, fantastic."

HBO Now subscriber acquisitions accounted for 30% of the 2.7 million new customers who signed on for HBO and Cinemax in 2015. (By way of comparison, Netflix last year added 5.6 million domestic subs.)

Mr. Plepler said upcoming shows by newcomers Jon Stewart, late of Comedy Central, and ex-ESPNer Bill Simmons are "particularly suited for" HBO Now; as such, the new content will "catalyze a great deal of [the] marketing" for the service in the coming months.

Another factor that could give HBO Now a lift in the near term is the return of "Game of Thrones." TV's most-pirated series roars back for its sixth season on April 26.

HBO in 2015 generated $5.62 billion in revenue for Time Warner, up 4% from the year-ago $5.4 billion.

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