Band boosts HBO: will strong sub growth spur more `event’ programming?

Will Lee

After terrorists attacked New York and Washington on Sept. 11, some cable industry executives believed that HBO’s $120 million miniseries Band of Brothers might be another casualty of war.

“The timing for them couldn’t have been worse,” says Gary Shorman, president of Eagle Communications, an operator in Kansas. “It was anybody’s guess how the show would perform at that point.”

HBO, the nation’s largest pay-TV service, with more than 25 million subscribers, hoped the ten-episode World War II epic would help fuel further subscriber growth. But the network was forced to yank related marketing and advertising–a campaign worth an estimated $10 million–just days after the attacks.

But it looks as if Band of Brothers may have proved its mettle after all, drawing a total of 215,000 new subscribers during the third quarter of 2001: 100,000 came from cable; the other 115,000 came from satellite, according to estimates by Kagan World Media, the newsletter and databook publisher that, like Cable World, is owned by Media Central. (Kagan makes its estimates by an ongoing process of comparing data with network officials.)

“That kind of quality programming unquestionably helps draw more customers,” a DirecTV spokesman says.

For operators, the good news about Band is not just the cut they receive of revenues from new customers (normally about half the total revenue); the better news, as one operator explained, is that strong interest in the series may have helped sell upgraded digital services.

In the intensely competitive pay-TV environment, HBO’s success with Band will no doubt ratchet up pressure on its competitors Showtime and Starz Encore to produce even more–and more compelling–original programming and acquire increasingly pricey theatrical movies to convince subscribers to sign on and stay on.

Robert Leighton, president of Starz Encore Entertainment, whose network makes hit movies its programming priority, doesn’t think big-event programming like Band necessarily helps prevent customers from leaving. “It’s much more about creating an image than about [customer] usage. For every Sopranos and Band of Brothers, there have been scores of things that haven’t done well at all.”

And though the pay sector’s nonreliance on advertising revenues might be a blessing in the ad market’s current slump, its obvious dependence on acquiring and retaining subscribers will make for a particularly pitched battle in a tough economy where consumers are likely to show less enthusiasm for premium services.

To further amplify Band’s effect for HBO, the network achieved its gains in a quarter when Showtime actually saw its total subscribership drop by over 20,000 units and the numbers for other pay services like Cinemax and Starz Encore, at least on the cable side, were only barely positive or flat.

Moreover, the 215,000-subscriber gain surpassed HBO’s bump in the second quarter 2001 (185,000) and even more so its increases in the same period last year (165,000). In fact, the rise is the most precipitous since 270,000 new subscribers came on board during the first quarter of 2000–when, not coincidentally, the then-long-awaited second season of The Sopranos debuted.

Larry Gerbrandt, Kagan’s chief content officer, ascribes a significant amount of HBO’s recent haul to its original programming, particularly Band of Brothers. “They had by far the best quarter ]among pay services] out there,” says Gerbrandt, “and their biggest distinction is the original programming, which really came through for them.”

But despite HBO’s ability to create such expensive “destination” programming events as Band to help drive market share, it is still highly unlikely that its network brethren, whose revenues depend on advertising in addition to license fees from operators, will do the same. “I’d be very surprised to see Band of Brothers serving as a bellwether in a new trend in cable programming,” says Jedd Buss-Palmer, a long-time operator programming executive and now president of Buss-Palmer Consulting, a content-evaluation and distribution consultancy. “The ad-supported networks simply don’t have the kind of money or business model that will allow that to work.”

Even HBO itself cautions against associating a gain in subscriber growth with a single program. The network, according to a spokesman, has never commissioned viewership studies on the matter, because it would consider such data an unreliable indicator of a program’s success. (In the case of the third quarter, it ought also be noted that the network debuted another, though much lower-profile, show in September, a comedy called Mind of the Married Man.)

And yet, HBO executives are relieved that the risky program seems to have caught on.

“Band of Brothers exceeded all our expectations,” Chris Albrecht, the network’s programming chief, said through a spokesman. “The critical praise was extraordinary and viewership, even after we pulled the advertising and marketing, matched the levels of our most popular series. HBO’s mandate is to give our subscribers something worth paying for, and I believe our customers felt they got something special in Band.”

Showtime, for its part, is attempting to differentiate and sell its tent-pole programming with quirk and edge rather than with big names and budget-bloating location shoots. Case in point: Of its three most popular series, one is about gay men (Queer As Folk) and another is about a Hispanic family (Resurrection Blvd.). “We’re always juggling creative ambition with financial prudence,” says the network’s EVP-programming Gary Levine. “And we will continue to do that. I think that bigger is not necessarily better; sometimes the broader the base, the more diluted the message. We’d prefer to reside in the land of the unusual than the land of the enormous.”

For one operator, a system GM for a top-ten MSO in California, Band of Brothers’ status as a programming event encouraged existing subscribers not only to call for HBO, but to sign up for the upgraded digital service, which translates into greater revenue for operators. Consumers who have basic-only service may be tempted to upgrade to digital because they want to see the pay services typically offered on digital tiers and because they want enhanced picture quality. Many of the callers had seen the Band of Brothers advertising well in advance of the series’ Sept. 9 premiere.

“Now, while the same thing happened with [existing HBO series] Sex and the City and The Sopranos,” says the California-based operator, “there was a noticeable difference this time. People did call, and [their interest] seemed to be coming through several different sources, whether it was TV Guide, word of mouth, whatever. [Band of Brothers] has certainly helped drive a fair number of my analog subscribers to digital.”

Five other operators contacted for this story said they had received an increase in requests for the pay service before and at the beginning of the show’s run.

As far as ratings are concerned, according to HBO research, Band of Brothers, produced by Tom Hanks, has performed on a par with its comedy hit Sex and the City and lagged only moderately behind The Sopranos. Overall, the Nielsen average for Band, which counted only Sunday night airings, was a 12.6 rating with a 17 share, representing about 4.4 million households and 6.9 million viewers.

By contrast, Sex and the City this season averaged approximately a comparable 12 rating, 17 share. But Sex has been on HBO for four years longer and has a much more entrenched fan base. Furthermore, Band’s performance considerably outpaced the last large-scale HBO miniseries project, the NASA-celebrating From the Earth to the Moon (also produced by Hanks, who is working on a miniseries about President John Adams for HBO). Earth averaged an 8.8 rating, 13 share. Of course, at a reported $55 million, it also cost half what Band of Brothers did.

And regardless of how Band performs financially, Kagan analyst Deana Myers predicts that the critically coddled series will make its network proud in nonfiscal arenas: “When Emmy night comes around, you’ll certainly hear about it a lot.”

COPYRIGHT 2001 Copyright by Media Central Inc., A PRIMEDIA Company. All rights reserved.

COPYRIGHT 2003 Gale Group

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