Hbo Situation Analysis

Lahore School of Economics

Master of Business Administration

Marketing Management

Final Project

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Submitted by:

UZAIR EJAZ

SITUATION ANALYSIS

Game of Thrones, an original and the most watched HBO series, grew its audience by 24% over the last season along with “The Sopranos” and “True Blood” which have produced communities of loyal and dedicated fans. Television and entertainment industry is more dynamic than ever and HBO is always finding itself on the threshold of keeping its position as number one. (Time Warner, 2014)

New technologies now allow everyone to view contents online, via computer, handheld devices and tablets. HBO is doing very well in today’s volatile environment. As the most prestigious and well-known premium cable entertainment channel, HBO still has the highest number of viewers (114 million viewers in 151 countries) as compared to other pay channels. Since 1972, HBO is continuously striving towards redefining its brand according the customer’s expectations. (Pearson, 2003)                          

HBO is more focused on advertising its brand (not the Shows) in the market depending on the type of SBU they advertise. Between 2012 and 2013 HBO’s media spending was higher than its competitors. Most of the media spending is done on Magazines and Cable. For ‘HBO GO’, online advertising was essential because it relates to online platform. ‘HBO GO’ also included as part of Apple TV & Samsung Smart TV to         offer customers lower prices with added convenience. (highbeam, n.d.)

Millions of dollars were spent by HBO to build the quality content that created such brand loyalty that secured HBO 127 million subscribers worldwide. HBO 2013 fourth quarter revenues grew by 4 per cent to $4.9 billion and operating profits of 1.8 billion, reflecting increases of 27 per cent in parent company’s (Time Warner) subscription revenues (Team, 2014). It is very impressive figure but the quality contents are very expensive to build and this is what keeping subscribers to come back; who now, cannot live without their HBO. (Launder, 2014)

HBO is a market leader when it comes to TV and Movies but pressures are building from its competitors i.e. ‘Netflix’ & ‘Showtime’. HBO must keep going to strengthen its brand through innovation and involvement of communities, but still it has been one of the most successful channels of many decades now.        

EXTERNAL ANAYLYSIS (PEST)

• Political-Legal Forces

• Govt/ Private Regulatory authorities such as FCC (Federal Communications Commission) and MPAA create complications for innovative production prospects.
• Increase costs of production.

• Socio-cultural Forces

• Sociological Environment under which HBO operates is stable.
• Technological advancement age is a blessing for online entertainment industry.
• No pressure on Film and Entertainment industry on things like “Going Green”.

• Economic Factors

• Current economic environment in which HBO operates is very expensive.
• HBO and its parent company have 9.8% of market share as compared to the whole industry capturing such small portion is very important, still huge amount of money at stake increase the risk factor.
• Production cost is very high which creates barriers for new entrants.
• Cost of capital is very high but it is just one time.
• Large companies like HBO Inc., under high levels of risk, will still be able to increase revenues as there is decreasing trend for traditional broadcast cable and people are forced to subscribe to other companies to access their programming.

• Technological Factors

• Use of Online and Mobile devices is increased.
• Different viewing entertainment formats, for example; HD and 3D are a challenge.
• Advanced Production Equipment is required.
• Trend to use handheld & wireless devices is increased.

External environment under which HBO operates shows that there are two basic touchstones for the profitability of this company, which are associated to capital and the ability to adapt to technological changes. This is because the cost of production associated with the TV and Film entertainment industry is very high, moreover all the modern techniques in how this industry delivers its product to the consumer. In general, HBO has the potential to continue to strive in the industry and sustain profitability as long as it can continue to be pioneer in the ways it adapts to changes in technology and use these changes in order to retain high market share in the industry.