Earlier today at TechCrunch Disrupt, Ryan Lawler led a media panel. On it, sat Alison Moore, HBO's Senior Vice President of Digital Platforms. Naturally, the topic of selling HBO direct-to-consumers via HBO Go came up.
“Here’s the thing: it’s math. It’s a little presumptuous to say that $8 [a month per consumer] is going to make the business whole,” was Moore's response.
Is it presumptuous to think that any of us know more about HBO's business than HBO does? Of course. But such a statement should also be a huge red flag for the company.
As Moore was on stage, I happened to be reading this piece by Farhad Manjoo. He talks about the circumstances that led to the creation of the iPhone, based on the testimony from the Apple/Samsung trial. Much of this information isn't surprising and some of it isn't even new. But the main takeaway is still important — especially in the context of HBO.
Given the popularity of the iPod and its centrality to Apple’s bottom line, Apple should have been the last company on the planet to try to build something whose explicit purpose was to kill music players. Yet Apple’s inner circle knew that one day, a phone maker would solve the interface problem, creating a universal device that could make calls, play music and videos, and do everything else, too—a device that would eat the iPod’s lunch. Apple’s only chance at staving off that future was to invent the iPod killer itself.
As I noted earlier (without the HBO context), in many ways, this is the perfect statement to sum up Apple's success of the past several years. They've gotten to where they are now because they haven't been afraid to take chances with their business, and this has allowed them to lead rather than follow. Moore's statement above suggests that HBO's thinking is the opposite.
And that shouldn't be too surprising — most companies think this way. After all, who in their right mind tries to disrupt themselves by destroying their own cash cows? It's exactly why we're now seeing Microsoft take their “no compromises” approach with Windows 8. It's Microsoft trying to change but also heavily hedging their bet. My bet is that this will blow up in their faces. We'll see.
But this is what Apple does. And again, a big part of why they win. The iPhone came along and ate into Apple's one-time largest business, the iPod. And now the iPad is busy cannibalizing Mac sales. And the iPad mini may cannibalize some iPad sales. This would look like a nightmare scenario to just about any other company in the world. But to Apple, it looks like progress. Because that's exactly what it is.
Continuing the quote from Manjoo's piece:
More than this simple business calculation, though, Apple’s brass saw the phone as an opportunity for real innovation. “We wanted to build a phone for ourselves,” Scott Forstall, who heads the team that built the phone’s operating system, said at the trial. “We wanted to build a phone that we loved.”
It was Apple's focus on product, rather than business that gave birth to the iPhone. Had the CFO tried to intervene with the numbers suggesting this wasn't what was best for Apple's business, he would have been right, but he probably would have been fired.
Likewise, Moore's statement about HBO is correct. The math is not in favor of selling HBO access directly to consumers. But if we're just thinking about this from a pure product perspective, I don't think anyone would disagree that this is what we all want. HBO is choosing not to build the service we will love, they're choosing the short-term money. The safe bet. The math.
But if they don't diverge from this path, it will lead to their demise. Innovation always beats math, eventually. That, you can take to the bank.