HBO’s growing subscription revenue
Time Warner’s (TWX) HBO segment comprises its HBO and Cinemax multichannel premium pay television services. HBO is the most widely distributed multichannel premium pay television service.
The segment has achieved remarkable growth, driven by increased subscription revenue. In 1Q18, the company’s HBO revenue grew 3% to $1.6 billion. Growth in the HBO segment, which contributes ~20.2% of Time Warner’s total revenue, was driven by 10% YoY (year-over-year) subscription growth. However, content and other revenue fell 29% due to lower international licensing, significantly hurting the segment’s revenue.
Increase in HBO subscribers
In 1Q18, Time Warner’s HBO subscription revenue, which has grown consistently, grew 10% year-over-year (or YoY) to $1.4 billion, primarily due to growth in domestic subscriptions, higher contractual rates, and international growth.
HBO’s highest increase in domestic subscribers was in 2017. At the end of December 2017, HBO had 54 million domestic subscribers and 142 million total subscribers.
In 1Q18, HBO renewed Silicon Valley and Barry for a sixth and second season, respectively. The company also telecast the premiere episode of Westworld’s second season, which saw 13% higher viewership than the first season’s telecast average.
HBO Now adding to revenue
HBO also generates revenue from its OTT (over-the-top) video-on-demand service, HBO Now. In March 2018, HBO launched its OTT service in Poland, marking the expansion of OTT services to all 17 countries served by HBO Europe. The company also works with online streaming providers, including Amazon (AMZN) Prime, AT&T’s (T) DIRECTV Now, and Sony (SNE) Vue.
Like Amazon, Apple, and Netflix (NFLX), HBO is investing heavily in original content. HBO’s original programming includes Game of Thrones, Westworld, and Strike Back.