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Xbox and PlayStation Could Give HBO Now a Big Boost

By Sam Mattera - Apr 17, 2016 at 9:44AM

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Both video game consoles offer access to a plethora of streaming apps, including Netflix, but Time Warner's service remains absent.

The Xbox One. Source: Microsoft.

Xbox and PlayStation could play key roles in driving Time Warner's (TWX) stock in 2016.

HBO Now, the company's streaming service, made its debut last year. It offers HBO content, including Game of Thrones, Girls, and Vinyl, over the Internet with no expensive cable package required. In February, Time Warner's management revealed that the service had racked up around 800,000 subscribers as of the end of last year. A fair amount, given that -- at the time -- the service was only about eight months old. Still, it was fewer than many analysts had anticipated.

Time Warner has several levers it plans to pull to drive HBO Now subscriber growth going forward, two of which center around game consoles.

More than 20% of viewing
Time Warner has been offering HBO's content over the Internet for many years. In 2010, it launched HBO Go, a streaming service that functions similarly to HBO Now, but requires a traditional cable package to access. Over the last six years, Time Warner has greatly expanded HBO Go's reach, bringing it to almost every major connected, and smart TV, platform.

HBO Now made its debut on the iPhone, iPad, and Apple TV last April, and in the months that followed, expanded to the FireTV, Roku, Chromecast, and Android. Although that covers most of the major digital platforms, HBO Go still has it beat. It's available on all those platforms, plus Samsung Smart TVs, Xbox 360, Xbox One, PlayStation 3, and PlayStation 4.

Those last four platforms in particular are heavily favored by HBO Go's user base. "PlayStation and Xbox...on HBO GO account for over 20% of viewing," HBO head Richard Plepler noted on the company's earnings call in February. Given that both services are nearly identical, the same could hold true for HBO Now when it arrives on those platforms, likely later this year. Time Warner has yet to confirm a specific launch date, but hinted that HBO Now would be coming to the Xbox and PlayStation in the near future.

It works for Netflix
The Xbox 360 and PlayStation 3 have sold more than 160 million units since they were first launched about a decade ago. Their successors, the Xbox One and PlayStation 4, have so far combined for about another 55 million. Even though those are global figures, and HBO Now is restricted to the U.S., getting on those consoles should still open up a massive new base of potential customers.

Time Warner has plans, such as a new series from Bill Simmons and John Stewart, that it believes will be more attractive to viewers on digital platforms. The company also pledges to ramp up marketing and continue to invest in digital services to aid its platform expansion ambitions.

An expansion of platforms makes sense as HBO Now competes with Netflix (NFLX 3.55%), which has always emphasized its availability as tantamount to its success. In its letters to shareholders, Netflix consistently highlights its gradual expansion, the continued improvement of its apps, and the status of its competitors:

Q4 2010: "There are now hundreds of...device[s]...that support streaming from Netflix, and our efforts are turning to rapidly improving our user interface on all of these devices."

Q2 2011: "Amazon recently added thousands of films and TV shows, and includes them as a free service to subscribers of its Prime shipping service. [But we] have vastly more streaming content, are available on more streaming devices and are purely focused on subscription video streaming."

Q2 2012: "...[our] investments produced improved Netflix players for both PC and Mac, as well as the continued expansion of our 'Just for Kids' feature, already on PC, Mac, Wii, PS3 and Apple TV, and coming soon to the Xbox and iPad."

Intuitively, the focus on accessibility makes sense: Those who lack the necessary hardware aren't likely to subscribe. There are many differences between HBO and Netflix, including price, content, and the fact that Netflix doesn't compete with its own broadcast channel. Still, the huge gap between Netflix (more than 43 million domestic subscribers at the end of last quarter) and HBO Now figures may be partially attributable to accessibility.

It will take time, but HBO Now will get there. Making its way to PlayStation and Xbox will go a long way toward shoring up the discrepancy.

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Time Warner Inc. Stock Quote
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Microsoft Corporation Stock Quote
Microsoft Corporation
$253.14 (-0.37%) $0.94, Inc. Stock Quote, Inc.
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