"Game of Thrones" Is Worth So Much More Than You Think

Contrary to popular belief, Time Warner (NYSE: TWX  ) doesn't need to make HBO GO a standalone subscription service to profit from hits such as Game of Thrones and True Blood.

Allowing current-season addicts to purchase season passes via Apple's (NASDAQ: AAPL  ) iTunes or Amazon.com's (NASDAQ: AMZN  ) Instant Video could add millions in new revenue without damaging Warner's relationships with cable operators.

A game of cash and carry
Fools know I've been critical of HBO GO. Not because the app isn't useful. Far from it. The problem is one of synchronicity: HBO GO only works on tablets and smartphones. You can't start an episode on your TV, move to your computer, and then move to a tablet without losing your place. HBO badly lags Netflix in this area.

Meanwhile, a look at Warner's most recent 10-K annual report shows the company's Networks segment generated $8.67 billion in revenue. HBO has 114 million subscribers worldwide. Thus, it's likely Warner receives at least $76 a year, or $6 per month, from each HBO cable subscriber.

What would happen to that stream if Warner agreed to let Apple and Amazon sell current-season passes? Consider what we know about Game of Thrones and True Blood, which returns to HBO for a sixth season on June 16:

  • More than 17 million on Facebook say they "like" these shows.

  • Each show attracts more than 4.5 million viewers regularly.

  • Fans illegally downloaded 1 million copies of the Game of Thrones Season 3 premiere.

  • A Twitter campaign in which customers were asked what they'd spend monthly for a distinct HBO GO service generated more than 163,000 responses within 48 hours.

Emilia Clarke as Daenerys Targaryen, the "Mother of Dragons." Photo credit: HBO.

As I see it, HBO's viewing restrictions limit the potential audience for both GoT and True Blood.

Going a step further, let's say those 1 million downloaders reflect the number of current HBO subscribers who would flee to iTunes or Amazon Instant Video for their fix. What would they pay? Several participating in the #takemymoneyhbo Twitter campaign named $15 to $20 a month as a fair price for HBO GO as a standalone service.

My guess is a plurality of this same group would be willing to commit $180 to $240 for current-season downloads priced at a premium cable operators could (grudgingly) accept. If I'm right, HBO would give up $76 million to cord-cutters for the chance to earn at least twice that from downloaders.

Think I'm crazy? Let's put this idea to a vote.

Let's say HBO were to decide to sell Season 4 passes of Game of Thrones for $59.99 each ahead of next year's premiere, or $17 more than AMC Networks (NASDAQ: AMCX  ) currently demands for its hit The Walking Dead. Would you buy? Why or why not?

Please mark your selection in the poll below, and then leave a comment to let us know which HBO shows you'd most want to see made available for current season download.

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Read/Post Comments (11) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 19, 2013, at 4:50 PM, nomemymine wrote:

    Because the show tells about human and all of the Sins we have, plus 2 more Sins: Power and Control.

  • Report this Comment On May 19, 2013, at 5:31 PM, burnthebird wrote:

    I would pay the $60 for Game of Thrones definitely, and *maybe* for True Blood, but only if it came with some kind of built-in discount for the DVD or BluRay set, or there was a discount for purchasing multiple series. For example, a "deal" to get both GoT and TB for $99 would be very hard to resist.

    Oh, and said subscriptions would also have to include all the "bonus material" that subscribers can get on HBOGo, like previews, "behind the scenes" videos, etc.

  • Report this Comment On May 19, 2013, at 5:37 PM, 13astion wrote:

    Not $60 for GoT. That's a ridiculous $6 an episode! Theater prices, there!

    Okay, so TWD is $42 a season, but they are (currently) 16-episode seasons; that's barely more than $2.50 per "hour".

    At that rate, GoT doesn't warrant more than $26 dollars -- and at a "premium", no more than $30.

  • Report this Comment On May 19, 2013, at 5:38 PM, 13astion wrote:

    As a result, I can't answer your poll because my choice, GoT on-demand for no more than $30 a season, is not a choice...

  • Report this Comment On May 19, 2013, at 7:47 PM, SLBN wrote:

    I personally subscribe to HBO and get the On-demand feature. I wouldn't pay anymore than I already do as a subscriber of HBO, which is $15 a month and I get the on demand features, bonus footage.

    However, I do think they are limiting their audience for GoT, but like I had to to do when I moved in with my bf I upgraded my service so that I was able to watch the series. Which I think is what most people that were wanting to watch the series would do.

  • Report this Comment On May 19, 2013, at 9:39 PM, souixcitee wrote:

    I get HBO free with my cable package. I was grandfathered in when I signed up for this cable. I would never pay for it on another service now that I am spoiled by not paying for HBO. I am bumbed out that I am not eligible for HBO on the Go but I just have to live with that if I don't want to pay for it. I would have to Pay online for it and I am cheap. That is why I haven't signed up for a satellite package since they have all these great deals going on now a days. It costs me way too much more to get the same channels I have on Dish or Direct TV. I pay $32.50 a month now and to have the same service I would pay at least twice that much by the time I pay the taxes and pay for HBO charges.

  • Report this Comment On May 20, 2013, at 9:25 AM, JohnatDuke wrote:

    I am not an HBO subscriber (or other premium channel subscriber either). I really like Game of Thrones and currently by the season pass from iTunes (or DVD) when it is released the following year. I would gladly pay a premium on that season pass price to watch the show "live"/in-season. As a point of reference - I did the same for the Sopranos as well. I am not interested in True Bloods.

    In general, I would rather pay for the show than the channel.

    I don't steal music or shows, but I can see where they are losing lots of money/customers through piracy.

  • Report this Comment On May 20, 2013, at 10:16 AM, Hecklrkosh wrote:

    Feels good to have something with substance on television- not sure about the agy vampires, but HBO did very well with G.O.T. Keep up the great work Tyrion, you definitely deserves and Oscar this year.

  • Report this Comment On May 20, 2013, at 10:49 AM, geekdadnyc wrote:

    $60 is a ridiculous price -- wouldn't ever pay it for just 1 season. I'd pay maybe $2/episode at most, if I cut the cord and dropped cable. (which I might do.)

    I would pay $60 for an HBO yearly subscription, if I didn't have to also pay for cable, no problem.

  • Report this Comment On May 20, 2013, at 11:49 AM, SpokenLegacy wrote:

    I'd really like it if HBO Go was a standalone streaming service. I'd gladly pay $10-$15 a month to stream it.

  • Report this Comment On May 27, 2013, at 1:02 AM, jbenward wrote:

    $59.99 or more... that is a whole hell of a lot. As someone said above, that close to the price of a movie ticket for a single episode of a series. Most people who watch GoT know that the quality is there for them to charge a premium, but $3 per episode is, I think, about the most you could charge most people . If that $59.99 included a copy (or a considerable discount) of the blu-ray version of the season when it was released, I would definitely consider it. GoT is valuable to me, but for $60 a season- there needs to be something else in the equation.

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