Friday, 1 October 2010

HBO's strategy in Central Europe

Linda Jensen had some interesting things to say at IBC about HBO's strategy in Central Europe, which I thought were worth noting down.

HBO's biggest CEE markets are Romania and Poland. Initially they just brought US content over into Europe, but now they’re making country specific versions of US formats e.g. In Deriva – a Romanian version of ‘In Treatment’. This corresponds to the strategy of many premium content producers – use great local content as a hook into imported fare

An interesting characteristic of the business is that they have certain freedom to develop their own technology and product lines. They're launching HBO Go shortly – a broadband OTT product developed in-house, before the joint venture was bought out by HBO. This seems to fit with Linda's world view on content: “a subscribe once, use anywhere” model that is day and date independent and her view is that Europe is underdeveloped vs. US in online:
  • eSell thru’: $580M US vs. $67M EU
  • Online VOD: $100M US vs. $20M EU
  • Spend per home on TV: $1035 US vs. $332 EU

That said, the reality of the world right now is that “the content industry of the near future is dependent on maintaining the business model of the past for as long as possible”. This is a global issue and there are additional challenges in her markets:

  • In Central Europe, credit card penetration is between 5% and 25%, depending on the market (vs. 80% in the UK, 60% in France)
  • Piracy is rife, although traditional platform subscriptions are up 6-fold in 5 years, demonstrating demand for premium content at a fair price

To summarise her view on the key factors if premium is to survive and thrive:

  • Strong brand
  • Investment in original content production
  • Ability to be on multiple platforms to extend reach, avoid disintermediation
  • Ensure no straying into models that turn analogue dollars into digital cents
  • Remaining local – key to selling premium

I was very impressed by Linda and the HBO strategy. She talked practically about how to make money in content and the real prospects for - and challenges of - digital. My belief remains that digital will increasingly become a significant part of the media mix, however it is not a 10 minute apocalypse - the change will be gradual enough to enable savvy organisations to respond in a timely and successful manner.

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