HBO plans to launch a stand alone over-the-top service next year.
Speaking at Time Warner's investor day Wednesday (Oct. 15), HBO CEO Richard Plepler said the new service would work with both current partners in the cable TV industry and new partners.
Plepler said that about 10 million U.S. homes have broadband only and no cable service, and that 5 million of those subscribe to a streaming video service. But those homes currently don't have access to HBO.
"Those numbers are expected to grow," he said. "It's a large and growing opportunity that is untapped... it's time to remove those barriers."
Plepler said over the top distribution had the to potential to produce hundreds of millions of additional revenue for HBO and parent company Time Warner.
Plepler said HBO will be aggressively looking to get into the 80 million homes that currently do not subscribe.
"We've been far too reliant on our partners" in the distribution business for marketing HBO, Plepler said. In some territories, HBO penetration is as high as 42%, in others it is as low as 14%.
"Obviously some of our partners are doing a wonderful job marketing our service and some, to say the least, are not," he said.
HBO plans to launch its first brand campaign next year he said.
Plepler said that HBO has added 2.5 million subscribers this year and is on track for its best growth in 18 years. Those subscribers are paying customers, but the network still has about 6.5 million non-revenue generating subscribers. Plepler said that as distribution agreements come up for renewal, HBO will aim to convert those to paid subscribers. "We will get our taste," he said, quoting Paulie Walnuts from The Sopranos.
HBO has been an early mover in giving subscribers digital access to its programming through its HBO Go service and has hinted that its experience meant it was prepared to launch an over the top service. But it wasn't clear whether it was willing to risk potential fallout from distributors and increased marketing and customer relationship expenses from what has been a successful and profitable business.
CBS Inc. has said that Showtime is considering an over the top service and Viacom's joint venture Epix is available to non-cable subscribers via broadband.
In late morning trading, Time Warner stock was up more than 2% to $72.32 a share, while other media stocks and the overall market were down.