Elmo's arrival points to HBO's future

Sesame Street announced a new five season deal with HBO. The seasons will be available exclusively on HBO for nine months before dropping at PBS.

This is HBO pursuing the Netflix, Amazon Video, and Hulu strategy instead of the reverse, the latter three all offer or plan to offer original children's programming. HBO has never had kids programming, and this move is a clear acknowledgment that they view themselves as a mini-bundle in and of themselves, more so than a channel carried by the traditional cable bundle.

HBO was once content to be a brand that stood for movie titles from the Warner Bros. catalog and boxing. Then it offered some comedy, and then original series, most of it targeted towards an adult demographic. HBO has had some great original series over the years, but it's fair to characterize their house style as having a fair bit of sex and nudity along with a fair dose of profanity and violence. They told us β€œIt's not TV. It's HBO.” but if you watched any of their series you weren't likely to confuse the two.

What they didn't offer was family or children's programming. The money was coming in by the truckload, especially during the heyday of DVD, so it wasn't as if HBO felt a great sense of urgency to diversify its subscriber base.

Then came Netflix, which doesn't have a house style. Rather, they have more of a technology companies approach to content and growth: why put artificial limits on your own growth? The limit on entertainment subscription service growth is a function of the diversity and quality of their content portfolio. To acquire a subscriber, you need enough content to entice that person to become a subscriber. Then you need enough interesting content each month to keep them from canceling (that's the main reason subscription services like HBO don't release all their series at the same time of the year).

Once you have enough content to acquire and keep one type of subscriber, the marginal return on your next dollar of content is higher if you produce content that appeals to another type of subscriber. That's the Netflix strategy. If you look at all their original series, they are all over the map in genre, style, tone. They want to offer something for everyone so their subscriber base can include anyone.

[Amazon Prime is an even more bizarre subscription because it includes not just video but free expedited shipping, Amazon music, unlimited photo storage, e-book lending libraries, Amazon-branded everyday essentials, cheaper shipping on groceries, and a personal drone for dropping your kids off at school. I made one of those up, but it might be part of Prime next year.]

And now HBO is following suit. The next step for HBO is to let its original series spill out from Sunday night. If you read the Hollywood Reporter or another industry rag, you'll no doubt have heard of HBO passing on quite a few original series recently. Some of that could be creative differences, but if any of it is HBO limiting themselves to what they can fit in their Sunday night time slots, they're imposing yet another artificial limit on themselves that makes no sense in this streaming, time-shifted age. If HBO Now is the future, at some point it shouldn't even matter if some content on HBO Now never airs on their cable channel, especially if it's something like Sesame Street which would seem out of place on a cable channel chock full of mature content. The MSO's wouldn't love that, and perhaps HBO would just tack on another channel like HBO Family, but they should be willing to consider any concessions to their linear channel to be a strategy tax.

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Since Twitter has largely replaced late-night talk-show monologues as the joke factory on the day's news, I enjoyed this roundup of humorous tweets riffing off of the HBO and Sesame Street deal.