A Short History of HBO
Time Inc., the world-renowned mass media company, wanted to found new paid television channel in the 1970s. Having established the most popular print media, the company was confident that they could also offer a television version of the quality content to its clientele. Thus, Home Box Office (HBO), a subsidiary of Time Warner Inc., was launched in 1972. The chosen date of the debut was at stormy night. In that fateful evening, the fledgling company managed to keep the subscription only of 400 customers (Mesce 1). There were no telltale signs of success. Moreover, despite the fact that the subsidiary was given the permission to proceed before, the critics had already predicted its demise. It was not hard for the developers of HBO to understand the reasons for the criticism. Before the advent of cable television, content delivered via the video channels was accessible to people in the same way as the radio was. Indeed, the radio had become the ubiquitous means of communication and information dissemination platform in the 20th century. In other words, no one paid a single cent to have the right to listen to radio programs. Broadcasting companies made money through commercials. In the same manner, television executives developed a business model wherein profits increased due to paid advertisements. Thus, it required a creative approach to compel people to pay for something that was as free as the air they were breathing (Mesce 1). Even in the midst of setbacks and criticisms, the proponent believed that similarly to the establishment of television and the way it had attracted the audience of radio programs, the HBO business model could also achieve spectacular successful and national recognition due to the innovative thinking of its team.
The creators of HBO were justified in charging a certain fee in order to use their particular brand of service. Firstly, content was delivered to the audience without the need to waste time on unwanted interference and accept the presence of commercials. Secondly, the company sold the idea of delivering sports-related shows. Thirdly, the price depended mainly on the HBO design to broadcast movies. Once the business operation started running efficiently, the company was able to buy the rights to blockbuster movies. After having earned a series of small victories in court battles and corporate maneuverings, HBO was able to deliver high-quality movies that were recently on at the movie theaters (Newcomb 1113). It was an offer that was difficult to refuse. As a result, the subscription rates had been growing exponentially (Edgerton and Jones 1).
Forty years after its debut at rain-soaked night, HBO was heralded as the biggest paid television service on the whole planet (Mesce 1). The company generated more than $4 billion in total revenue (Newcomb 1113). At the same time, the company reached 100 million international subscribers from Europe, Latin America, and Pacific Rim countries (Mesce 1). Consequently, initially unpopular company, which did not show signs of great promise, has become an iconic brand similarly to other famous corporations as Coca-Cola and IBM.
Ownership of HBO
As mentioned earlier, the original owner of HBO is Time Inc. However, major changes to the ownership structure of the company had happened, particularly when Time Inc. merged with Warner Communications Inc. (Home Box Office, Inc. 1). The deal was completed in the 1990s. In the process of merging, two giant companies and their subsidiary companies labeled as corporate assets were included in the same deal. Thus, they were HBO, Turner Broadcasting System, CNN, DC Comics, and Warner Bros. Moreover, another merger went through in the 1990s when AOL Inc. purchased Time Warner. After the financial disaster created by the tech bubble at the turn of the 21st century, Time Warner stopped its cooperation with AOL Inc.
Time Warner, Warner Bros., and AOL
It is important to simplify the complicated interconnections between subsidiary companies which have resulted from the multiple mergers of three parent companies. Time Warner Inc. covered mainly print media and launched HBO as the first paid television business. In addition, Warner Communications Inc. belonged to the broadcasting business making Ted Turner’s mass media companies the most influential. For example, similarly to HBO, CNN has created a profound impact on the whole world. Moreover, Warner Bros. Entertainment Inc. is the subsidiary of Warner Communications Inc. which produced many movie classics. AOL Inc. is another multinational mass media corporation which merged with Time Warner. However, their cooperation did not last long.
HBO business was designed to provide a specific service allowing subscribers to enjoy their favorite movies, critically acclaimed or blockbuster films in the comfort of their homes. That innovative type of movie programming was possible due to the HBO’s prior arrangements with Hollywood film studios that allowed the company to buy the rights for the movies. During its development, the company has been delivering sports programs, movies, and original series to millions of households all over the globe (Newcomb 1113).
For instance, in the 1980s, HBO spent half a billion dollars to buy movie rights from Warner Bros. (Home Box Office, Inc. 1). According to the contract, they were able to use the content for five years. The company also purchased the rights to use seventy movies of MGM/UA Entertainment Company for several years (Home Box Office, Inc. 1). In addition, the same arrangement was made to gain the possibility to deliver eighty films that were produced by Paramount Pictures Corporation (Home Box Office, Inc. 1).
Although HBO focused mainly on buying the rights for the films and delivering them to the subscribers, the company had to respond quickly to the changes which marked the decade of the 1990s. Despite new challenges, HBO remains the pioneer in the cable television. In fact, it always manages to create original content for demanding audience. For example, HBO took advantage of the demise of ABC’s Wide World of Sports and created a new product which offered boxing matches (Newcomb 1113). The company also won acclaim by supporting the stand-up comedy industry and by working with popular comedians, such as Jerry Seinfeld and Ellen DeGeneres (Newcomb 1113).
Taking into consideration the creation of original content, HBO captivated the audience by producing highly popular television sitcoms, such as The Larry Sanders Show, Curb Your Enthusiasm, and Sex and the City (Home Box Office, Inc. 1). In addition, HBO started to expand its influence when the company began collecting Emmy Nominations and Awards. The team of HBO is known for not being afraid of adopting new business strategies and financing ambitious television miniseries, such as Band of Brothers, and hour-long dramas – The Sopranos (Newcomb 1113).
Products or Services Provided by Subsidiaries under Time Warner and its Influence on HBO
It is interesting to highlight the products or services provided by other subsidiaries of Time Warner Inc. For example, the assets of Warner Companies are CNN and Warner Bros. The former provides twenty-four hours news adhering to high journalistic standards while the latter delivers world-class movies which people enjoy watching all over the world. Thus, the parent company of HBO is involved in journalism and mass media. For example, its magazines shape the political and business opinion of the society while AOL Inc. focuses on the online services.
Undoubtedly, the owners of the company follow highly progressive and innovative business models. As a consequence, it is evident that they could influence the creation of content that reflects liberal ideas and opposes the conservative ones. For example, the sitcom Sex and the City had a tremendous impact on the society. Every sociologist would admit that reaction to the series might differ. Thus, parents would not appreciate the language and the scenes that might become available to their children who also had an access to HBO. On the other hand, the synergy of resources contributed to the creative force and technical capabilities produced by the interaction of different corporate assets. It placed HBO in a unique position as it was one of the first television companies which started developing groundbreaking content accessible to hundreds of millions of people. For example, it is difficult to find a better alternative to the narration of World War II history than the miniseries entitled Band of Brothers. HBO also supports the creation of documentaries and other productions that expand the purpose and significance of cable television.
Challenges and Issues with Regards to the Ownership and the Products
The presence of different corporate assets and the interaction of subsidiary companies under the control of Time Warner have created challenges and ethical dilemmas for HBO. For instance, the company consists of various media resources that might represent negatively the conditions of HBO. It is not hard to imagine a scenario when investigative journalists working for one of Time Warner’s newspapers are persuaded to forget professional relations and report an ugly story about HBO. Moreover, HBO is constantly subjected to unexpected investigations which should not be interfered according to the policy of the parent company, especially when its writers or journalist should report on the financial state of HBO. The same type of dilemma is created because of HBO’s relationship with CNN. News reporters and journalists have a sacred duty to tell the truth regardless of the consequences. However, it is not an easy task to accomplish it if the parent company cannot afford a negative publicity.
The possible conflict of interest can appear in HBO’s association with Warner Bros. because, in the past, HBO had to buy the rights in the same way as other paid television companies, such as Showtime. However, HBO can receive more favorable terms due to the connection with the filming company. Though, early in its history, Viacom sued HBO for an attempt to hoard the rights of Hollywood films barring other paid television companies from participating in the competition and having an access to the materials (Home Box Office, Inc. 1).
Future Consumption of HBO’s Products
HBO subscription is not for everyone. The company’s business model requires the payment of a substantial fee. Affluent households may not feel the cost of maintaining a monthly or annual subscription, but low-income families may be unable to pay for an HBO subscription. However, according to the artists and movie enthusiasts, there are plenty of reasons to support HBO by purchasing the subscription offer. It important to support HBO and to patronize the products and services that the company is selling to the subscribers because HBO’s tens of millions satisfied customers and the multitude of awards prove its importance and the positive impact of the company on the business of entertainment and the expansion of human knowledge. Continued support means positive cash flow which will provide investment money for future projects. Any limitations on the expansion or continued patronage of the product may hinder the company from investing in risky ventures which could bring success.