Last month, HBO announced plans to launch a standalone streaming service. Slated for a 2015 release, the Netflix-like service will offer customers the ability to access HBO content online instead of subscribing through a cable provider.
"It is time to remove all barriers to those who want HBO," says Richard Plepler, CEO of the network.
The rise of streaming services highlights the significant transformation of the media landscape. And for HBO, a successful 42-year-old media company with some of the most passionate audiences, this move is an uncharted path. HBO's traditional business model relied on partnerships with cable providers for distribution, allowing the company to focus on creating content.
But the world of streaming makes it possible to cut out the middleman: content providers like HBO can now sell their content directly to consumers without going through cable providers. By offering a stand-alone service, HBO can now have direct relationships with its viewers - which means it now needs to get closer to its own customers.
And that relationship need not wait for the launch of the streaming service. That's because just like any company about to enter a new market, HBO needs to answer some critical questions about its customers - ideally before the launch of the new service.
- What do customers want?
Netflix is currently the leader in video streaming. Amazon is also getting a lot of traction. In the meantime, streaming as a whole is gaining popularity: 46 percent of Americans pay for a streaming service. That number is only expected to grow, which explains why more media and entertainment companies want a piece of the pie.
As it enters this new space, HBO needs to understand what's driving the popularity of streaming services. As of last year, convenience - not original content - is still the number one reason customers subscribe to streaming services. But as the market matures, people's motivations for subscribing will change, and customer engagement will be key to getting ahead of competitors.
More importantly, to differentiate itself from market leaders, HBO needs to identify the weaknesses of current market leaders. Big data will help reveal what people are watching, but that information won't be enough.
To discover opportunities in a new market, companies need to engage customers directly. Customer intelligence will help HBO - or any company launching something new - uniquely position its own products or services.
- How can we maximize our marketing efforts?
An effective marketing push can give companies momentum when launching new offerings. This is true for HBO as well - especially since it's entering an increasingly crowded space.
Getting the price right with the help of its customers will be critical to HBO's marketing strategy. That's because video-streaming customers are more sensitive to price changes than cable subscribers - something that Netflix painfully discovered when it missed subscription targets after implementing a $1 price increase.
Smart use of customer feedback will not only help HBO with its pricing strategy - it can also the media company figure out the rest of its marketing game plan. To reach Millennial cord-cutters and loyal Netflix customers without alienating its current subscriber base, HBO will need to come up with a brilliant and unique promotional strategy that reflects the needs of today's media customer.
- How can our customers help strengthen our partnerships?
By telling the world about its plans for streaming services, HBO finds itself competing with cable companies. That situation is awkward because HBO's current business model relies on selling content through cable providers.
This situation isn't unique to media companies. In CPG, for example, manufacturers are increasingly selling directly to consumers, competing with their retail partners in the process. New business models continue to blur the line between partners and competitors.
The smart move for HBO is to be customer-centric and to use data and customer feedback to justify its moves with its partners. Customer intelligence can provide HBO with a more holistic picture of the needs of the various customer segments it is trying to reach. It can also help the company predict how its own moves will affect partners, maximizing revenue while minimizing impact to cable companies.
- What will keep customers loyal?
HBO is only one of the many media company trying to enter the streaming business. Another media giant, CBS, announced similar plans last month. Increased competition means attracting customers is only half of the battle. Keeping customers will be just as crucial in this new space.
Retention is particularly important because customers can easily switch between different streaming services. Netflix users, for instance, could choose to subscribe when a new season of Orange is the New Black is available, unsubscribe when they're done with the latest season...and resubscribe when a hot new show is available again. Understanding why people subscribe to its service and getting customer feedback on the quality of its content will help HBO keep its customers happy.
Of course, this is true for any company as well. Keeping customers happy - and keeping them loyal - is critical as brands offer new products and services.
Today's media industry is not for the timid. As an established media brand, HBO knows this firsthand. Entering the streaming business is risky, but HBO can maximize its chance of success by relying on the collective wisdom of its passionate viewers.