HBO Now hasn’t started turning a profit yet since its debut in April, but that’s no cause for alarm, according to Time Warner executives. During an earnings call Wednesday, the media corporation’s chief financial officer, Howard Averill, revealed that the service will likely to continue to operate at a loss through 2015 but is expected to ultimately become “highly profitable.”
Averill explained that while the service may remain in the red all the way through the end of the year, financial reports should start looking better in the third quarter and beyond. “Our early experience suggests HBO Now will be a highly profitable revenue stream over time,” the CFO said.
So far, revenue from the service has yet to offset the costs to develop and market it, but that’s not unreasonable considering it’s only been available for a short time. On top of that, new subscribers started with a 30-day free trial. As the client base grows, revenue should eventually cover the initial investment and outstrip costs.
While Time Warner didn’t release figures for how many current subscribers the standalone HBO streaming service has, Variety reports that estimates place the number around 1.9 million. Time Warner’s goal has been to appeal to cord-cutters — those who don’t subscribe to cable, favoring online entertainment options instead — as well as cable subscribers whose packages don’t already include HBO. It’s a group of over 80 million potential consumers.
As HBO pushes to expand availability to more devices and reach new consumers, we’d be shocked if Averill’s predictions didn’t come true. In spite of competition from the likes of Netflix and Amazon, whose pools of original content seems to be growing by the day, HBO’s reputation for high-quality content is currently unparalleled. The streaming service may be in the red for now, but it won’t be for long.
