Bill Nelson

May 10, 2010 World Screen
This interview was originally published in the MIPTV 2010 issue of World Screen.
 
Long before the term “wherever, whenever viewing” became popular, HBO was anticipating its subscribers’ wants and needs. It pioneered on-demand television and multiplex channels as well as the original programming that drove those services. Today it is finding new ways of offering programming online with HBOGO.com. Bill Nelson talks about the importance of always keeping the customer satisfied.
 
WS: When did the idea for on-demand viewing come about on HBO?
NELSON: Back in the 1980s, in order to fill out our 24/7 52-week schedule, HBO had an abundance of programming, both licensed and original, and unfortunately for the consumer at that time, they could only view what was scheduled at the moment they decided to watch the one linear network. But as compression technology freed up capacity, it allowed us to launch multiple channels of HBO—we call them multiplex [channels]. And the consumer response to that was overwhelmingly enthusiastic. In the 1990s, when HBO had a significant amount of quality original programming and the licensed Holly­wood movies, technology again provided a natural progression that allowed us to be the first mover to on-demand. So because of our huge advantage in programming and the capability of on-demand viewing, HBO has been able to increase its lead position over the competition. The programming inventory superiority is even much more apparent when you view it on an on-demand interface.
 
WS: How important has HBO On Demand been for the company, and how has it built on the relationship you have with your customers?
NELSON: Subscribers of HBO On Demand watch more of our programming and therefore they are more satisfied with their subscription. Again, the quality and quantity of our programming on demand actually lets the consumer impulse-view what’s attractive to them on a very convenient basis, so on- demand immediately exposes the depth and breadth of the network’s programming inventory. It’s a paradigm that lifts our brand above the competition because the superiority of the content becomes instantly clear to the consumer. And that supports the power of our brand, the programming offering, and once again makes the price/value proposition that much stronger because of the impulse nature of the viewing capability and therefore the ultimate viewing convenience.
 
WS: What do you know about how your subscribers are using on-demand both on TV and online?
NELSON: We know that on-demand increases viewership of our programming by an average of about 20 percent. And on certain shows, HBO viewership on demand can be as high as almost 40 percent of the total viewership of that show. That is a revealing number because it means convenience is extremely important to the consumer, and we know the increased viewing means increased overall satisfaction, which is what drives our subscribers and certainly our revenues.
 
WS: Are you finding that because of the convenience of the service, more subscribers are viewing HBO On Demand than the linear channel?
NELSON: Currently, there is not more viewing on demand than on linear because of the number of multiplex channels we have. As far as a trend over time is concerned, viewing will increase on demand. And we have seen differences in how males and females view—typically the male is more inclined to surf through the HBO multiplex channels, and females are more likely to go right to HBO On Demand. More and more, as time goes on and as the younger generation has a larger share of the HBO subscriber base, they have been essentially trained, if you would, to go to impulse viewing. So over time, certainly the usage of HBO On Demand will continue to grow.
 
WS: Are you finding that the Internet is a friend or an enemy to a pay-TV service?
NELSON: I’d say it’s a friend, and we’ve been able to successfully utilize it in three ways. First, it’s a very strong promotional vehicle. We recently relaunched our network website hbo.com with a very elegant design that puts the programming front and center with some very vibrant video. Fans of HBO love to immerse themselves in this world, whether to partake in community message boards, watch video clips or search our schedule. Also, for promotional purposes, we make video material available across a variety of platforms, including YouTube, iTunes, Facebook and MySpace. Last year alone, and this is a very interesting statistic for us, nearly 200 million pieces of HBO content were viewed on those sites. These sampling opportunities then result in new subscribers, or purchases of our DVDs, and ultimately translate into more revenue as well.
 
Secondly, we’ve used the Internet to build the HBO brand with successful interactive experiments, such as HBO Voyeur, which took home three advertising awards at the Cannes Lions Advertising Festival two years ago, and more recently with HBO Imagine [which allows consumers to view a scene from four different perspectives]. We’ve found ways of using the Internet so the consumer can actually interact and almost control the way they use some of our promotional original programming.

And third, of course, the Internet provides business opportunities. We recently began rolling out our new broadband product, HBOGO.com. It’s attached to our subscription service, and HBO GO gives our customers another way to access HBO programming wherever and whenever they want. It enhances the subscription, therefore makes the service more attractive and satisfying. It is an absolutely beautiful product with over 600 hours of HBO programming available anywhere you have access to a broadband connection. After airing on our linear network, the programming goes on to live on other platforms, using the Internet not only from a promotional standpoint, or an interactive standpoint with our subscribers and potential customers, but also for the real business opportunities of enhancing the value of our subscriptions and also downstream video exploitation of those shows as well. The Internet is certainly a friend.

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WS: Original programming has been so important in driving all HBO businesses, what product are you most excited about now?

NELSON: HBO has been the clear leader in setting the high water mark in original programming for TV, from critical acclaim, to viewership, to awards. Now we have more original programming in development and on the air than ever before in our history, and I’m very optimistic about the prospects of those shows. A few I’m especially excited about. One is The Pacific, the epic 10-part World War II mini-series from the same producers as Band of Brothers, Tom Hanks, Steven Spielberg and Gary Goetzman. It follows three U.S. marines from the 1942 battle of Guadalcanal right through V-J Day in 1945. Another is You Don’t Know Jack, an HBO Film that offers an absolute stellar performance by Al Pacino as Jack Kervorkian during his epic legal battles defending a patient’s right to die. And a third is Boardwalk Empire, airing this fall, which is an ambitious new drama series set in Atlantic City at the dawn of Prohibition in 1920. It’s executive produced by the Academy-Award winning Martin Scorsese, who also directed the pilot, and created by Emmy Award-winner Terrence Winter of The Sopranos. We are also thrilled about a lot of our returning popular series from True Blood and Entourage to Hung, Big Love and Curb Your Enthusiasm to name a few. So we have quite a stunning line up ahead of us.

 

WS: As HBO’s original programming increases in importance, are feature films a little less valuable, because they are available to viewers in so many ways?

NELSON: We still see theatrical films as a significant part of our pay-service offering. They make up about 70 percent of our schedule and are significant attributes to HBO On Demand and now Cinemax On Demand as well as our new broadband delivered HBOGO.com product. Hollywood movies have always been exploited before the pay-TV window, but there is a still a strong desire among our subscribers for uninterrupted, unedited Hollywood movies. Last year, for example, we saw our Saturday night theatricals jump about 40 percent in ratings compared to the year before. Our research tells us that the very people who like to watch a film at the theater, or during the VOD window, or even those who buy DVDs, are the same people who rank HBO as the highest price-value pay-TV offering. Film still plays a very, very important role for us and still brings value to our subscribers.

WS: Speaking of being the highest-value pay-TV proposition, did the recession impact you or did people opt to maintain pay TV in their budgets?

NELSON: Our research showed that a lot of people stopped going to upscale restaurants or buying jewelry or automobiles. Those types of luxury items were among the things that average consumers cut from their budgets. They retreated to their homes and then said, “Now that we have cut all of that out what do we have?” And most important for HBO, because of our brand and our stellar programming lineup, both licensed Hollywood movies and original programs, consumers continue to see HBO as a great price-value. If you think about it, our average price is about $15. That is less than the cost of one DVD. It’s equivalent to only about three downloads on iTunes. HBO offers great price value when you think about the hundreds and hundreds of hours of movies, sports programming, documentaries and HBO Films we have to offer. Even during this bad economy, our brand value increased and became a magnet and a safe haven for those consumers who unfortunately had to pull back on spending.

 

WS: How important are HBO’s international businesses to the company’s overall revenues?

NELSON: International has been a very important financial growth element for us. We have built the HBO name into an international brand through licensing our programming into many markets overseas as well as distributing the HBO and Cinemax networks. Because of that strong brand recognition we have some very attractive growth opportunities we are pursuing. HBO Inc. has HBO and Cinemax networks in more than 57 countries and HBO has the lead pay-TV position in each of the markets in which it operates. In those markets we are now ramping up production of local original programming as well as introducing innovations such as multiplex and on demand like we’ve done here in the U.S. And on the sales front, which really put our brand front and center across many countries, we license that original programming to broadcast and cable networks in more than 216 countries and territories. And we have a very solid DVD business internationally as well.