Could Apple Make the a la Carte HBO Fantasy Come True?

Despite outspoken protests on the Internet for Time Warner (NYSE: TWX ) to offer a stand-alone HBO service, the parent company has been hesitant to break ties with the cable industry and go over the top. With the news that Apple (NASDAQ: AAPL ) is in talks with Comcast (NASDAQ: CMCSA ) to provide a live TV streaming service, Apple could provide a new avenue for HBO to reach viewers.

An over-the-top HBO service could help the company compete against Netflix (NASDAQ: NFLX ) and negate the effect of cord cutters. Before Netflix investors go running for the hills, however, let’s explore if Apple is the company that can make such a dream a reality.

HBO is ready to go
HBO Chief Executive Richard Plepler made comments earlier this month that the premium channel is willing to offer a stand-alone service as soon as the numbers make sense. Presently, however, there are less than 10 million broadband-only households in the U.S. Comparatively, there are roughly 100 million pay-TV households.

Moreover, competition with Netflix is almost a non-issue for the company. Plepler noted that HBO does well in homes that subscribe to Netflix and vice versa. While Netflix is often seen as the scourge of cable companies, it’s often complementary to most cable packages — not a replacement.

HBO relies on cable operators to market its product and provide customer service. This allows it to focus on making great content. A stand-alone service may require it to invest in sales and marketing, customer support, and additional infrastructure to ensure service.

Netflix spent about 20% of revenue in 2013 on marketing and technology and development. To go it alone, HBO’s expenses would surely rise to a comparable level, considering the similar size, reach, and business of the companies.

Read more here.

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