Time Warner's (TWX) premium cable network, HBO, will launch several new series this year. Rock drama Vinyl and adult cartoon Animals will make their debuts later this month, followed by science-fiction thriller Westworld sometime thereafter. These shows will play vital roles in retaining HBO's base of more than 100 million paying subscribers. It's likely they'll win at least a few Emmy awards, and they could eventually join HBO's legendary pantheon alongside such hits as The Sopranos, Game of Thrones, and The Wire.

But in terms of the network's future, its most crucial new series may be one starring a large yellow bird. Last month, the long-running children's program Sesame Street aired on HBO for the first time ever. In a five-year, 35-episodes-a-year deal, new episodes of Sesame Street will air on HBO and its digital platforms. While Vinyl, Animals, and Westworld will be key to maintaining HBO's existing business, Sesame Street opens up an entirely new market for the network, one that it could utilize to add millions more subscribers in the years ahead.

Not entirely exclusive
For the last 45 years, Sesame Street has been a public broadcasting staple. That won't change under the terms of the Sesame Workshop's deal with HBO. The nonprofit creator of Sesame Street will continue to deliver episodes of the children's program to PBS, but only after they've aired on HBO nine months earlier. The Sesame Workshop also plans to develop two other original series (including a Sesame Street spinoff) that will air on HBO before heading to PBS.

PBS is freely available to anyone with an over-the-air antenna, and its PBS KIDS app grants free streaming of Sesame Street episodes. That will dampen the pull of HBO's Sesame Street somewhat, but HBO will still be offering a superior experience. On Time Warner's earnings call last November, CEO Jeff Bewkes identified the Sesame Street deal as one aimed primarily at bolstering its digital apps.

In addition to 35 new 30-minute episodes every year for the next five years, HBO subscribers can stream some 150 classic Sesame Street episodes at any time through its digital apps, HBO Now and HBO Go. That amounts to dozens of hours of children's programming, most of which is not easily accessible elsewhere (PBS KIDS' catalog is limited to a handful of recently aired episodes).

Not just for adults
Time Warner is in the midst of transitioning its HBO business. With the arrival of HBO Now last year, HBO is no longer bound to the traditional cable bundle. Cable subscribers still comprise the overwhelming majority of HBO's customer base, but the network's growth prospects seem tied to its digital offerings. More than ever before, HBO is competing directly with Netflix (NFLX 1.74%).

Although Netflix has more domestic subscribers than HBO, Time Warner's network has more subscribers in total. In a note released last spring, analysts at UBS projected that Netflix would overtake HBO by 2020. UBS wasn't negative on HBO (the analysts thought it would add additional subscribers in the years ahead) but argued that its demand would ultimately be limited by its addressable market.

HBO has consistently offered a catalog of children's films, but hasn't made significant investments in children's programming in many years. Since the turn of the millennium, HBO has been aimed squarely at adult viewers. In contrast, Netflix (though it's invested billions in adult series) has placed significant emphasis on children's programming -- and more is on the way. Last December, Netflix's Ted Sarandos revealed that the streaming giant was working on 30 different series aimed at children.

Sesame Street alone won't be enough to counteract Netflix's sheer volume, but it could represent the beginning of an important strategic shift for HBO. If Time Warner can make its network as appealing to children as it is to adults, it could entice a growing number of parents to sign up for the service.