Verizon Wireless, HBO and how best to adapt to disruptive technology
The disruptive technology that is the Internet is forcing an array of content and service providers to make a hard choice: take advantage of a new distribution pipeline that might cannibalize existing revenue, or guard the current business model at the risk of being cannibalized by someone else. This week, Verizon Wireless made a choice that illustrates the former path, and HBO stuck to the latter.
Specifically, Verizon Wireless announced that customers with Blackberry or Android smart phones would soon be able to use a free app enabling them to make calls with Skype -- not just through a catch-as-catch-can WiFi connection, but through Verizon's widely available 3G network. Skype lets people make phone calls through the Internet, bypassing the telcos' conventional (and far more expensive) voice networks. By embracing Skype, Verizon is betting that any revenue it might lose from customers downgrading their voice-calling plans will be more than made up by added sales of data plans and a share of the revenue from Skype subscriptions. That migration was already happening without Verizon's participation; this way, it will get a piece of the action on Skype.
HBO, meanwhile, announced that it would make its movies and original programs available online -- to people who subscribe to HBO on Verizon's FiOS fiber-optic TV and Internet services. It's a similar effort to what HBO has done with selected cable systems, where customers with HBO subscriptions on their TV can get free access to the network's programs on their PC. The new HBO GO service won't necessarily bring more customers to HBO, though -- after all, the network refuses to sell online-only subscriptions. Instead, its main goal seems to be giving online video fans a reason not to cancel their pay TV service. Granted, HBO's bread and butter is the fees it reaps from pay TV subscribers. But with no HBO available to them online, the small but growing number of Internet users who are abandoning cable and satellite services are finding other movie services to take its place. Like, say, Netflix or Crackle.
-- Jon Healey