HBO is looking to scale up its business even further and is taking tips from the Netflix business model in order to do so. During Time Warner’s Q4 earnings call this week Time Warner CEO Jeff Bewkes and HBO CEO Richard Plepler reveled the focus of HBO going forward in 2016 and beyond and the plans are reminiscent of the steps Netflix has taken towards global expansion.
In 2016 HBO will be “increasing the hours of original programming by 50% globally,” said Bewkes. Along with increasing its content offerings HBO is looking to increase its international presence.
HBO has taken steps towards expanding its brand with its HBO Go offering for those with subscriptions through their pay TV provider and last year HBO released its stand-alone streaming service, HBO Now. The stand-alone service so far has not scaled as expected with less than one million subscribers but the company recognizes the potential of the stand-alone service although it is only offered in the US and select US territories for now. HBO does have another stand-alone service, HBO Nordic which was launched in 2012 in Scandinavia to countries including Sweden, Denmark and Finland as sort of test of a cable-free streaming service.
“As we introduce all this new content and further expand distribution, we’re going to step up our marketing reach beyond that. We think the combination of an even stronger original programming line-up and best selection of hit Hollywood movies and ever improving digital products will drive continued subscriber growth both at HBO Now and with our traditional distributors… We’ll continue to expand HBO streaming products internationally as well. We anticipate significantly expanding our OTT footprint in Latin America and recently we announced plans to launch a standalone streaming product in Spain later this year,” said Bewkes.
HBO is looking to stray from the traditional ecosystem of the market and part of that means shedding its connection to the traditional cable package to become as ubiquitous and available as Netflix. Building an OTT brand like Netflix requires not relying on traditional cable, but at this point HBO cannot simply break ties with the traditional cable companies so HBO’s approach to global expansion will have to be on multiple fronts, not simply a switch to OTT.
“We have three basic tenants of course of profit around the world, one is our networks business in 60 countries, and of course licensing into over 150 countries. And it is not, as we’ve said to you before, a one-size-fits-all strategy. We look at this market by market where we think we can make the most money and we follow the money,” said Plepler.
Netflix is demonstrating just how large niche audience opportunities are when dealing on a global scale. The SVoD OTT service, which launched around the world earlier this year, has pursued a “niche-by-niche” strategy in content that is now enabling it to build large audiences from what traditional players consider long tail content.
Netflix VP of personalization and algorithms Carlos Gomez-Uribe highlighted this strategy in a recent blog post about developing personalized recommendations on a global scale.
“One way that Netflix generates personalized recommendations for individual members involves identifying communities of other members with similar movie and TV show preferences, and then making recommendations based on what is popular within that community,” said Gomez-Uribe in the blogpost. “Rather than looking at audiences through the lens of a single country and catalog, Netflix’s global recommendation system finds the most relevant global communities based on a member’s personal tastes and preferences, and uses those insights to serve up better titles for each member, regardless of where he or she may live.”
The result is a cache of data about user preferences that has enabled Netflix to target and group specific niche audiences across markets. Take Netflix’s anime section: Gomez-Uribe noted that although anime is most popular in Japan when viewed by country, Japanese Netflix subs make up only 10% of the anime community, as Netflix refers to it. The rest of the community is spread out across all of its markets.
“We saw that great stories transcend borders, and that viewers around the world have more in common than they may realize,” he said. The global anime community is large as a whole, but that community is spread thinly across all the territories that Netflix is available in. By expanding globally, Netflix is now able to aggregate and capitalize on those niche communities and program directly for them, which in turn will help Netflix gain and keep subscribers.