NEW YORK—Just as it rewrote the rules of television programming with its hit comedies and dramas, HBO is now trying to rewrite its business plan.
One of the biggest performers for its New York-based parent, Time Warner Inc., HBO has increased its revenue 50 percent over the past five years, investing in daring original shows that have kept pulling in new subscribers.
The new script: DVD sales, syndication, international growth and even investing in theatrical movies.
"The goal here is for HBO to become a multifaceted entertainment and media company," said HBO Chairman Chris Albrecht. "To sustain the double-digit growth, we need to have the HBO brand extend into as many areas as possible."
So far, it is working. Five years ago, only 5 percent of HBO's profit came from outside subscriber fees; now about 20 percent of its profit, which stood at $900 million in 2003, is from nonsubscriber sources.
Finding other ways to grow is also crucial for the channel because one of its hit shows, "Sex and the City," began its final run Jan. 4 and another, "The Sopranos," also is approaching the finish line.
Rich rerun deals
But while HBO certainly will miss Carrie Bradshaw and the gang, from a financial standpoint the show's departure won't hurt the network's bottom line. In fact, "Sex and the City" will continue to generate big bucks for years to come, thanks to DVD sales and rich rerun deals on local television stations and sister cable channel TBS.
Although the broadcast networks and their program suppliers long have reaped millions from syndicating reruns of successful shows, HBO had little success there. There were doubts that its risque content could play on basic cable or broadcast TV.
But standards change, and in June, reruns of "Sex and the City" will begin on TBS. They will be edited so that commercials can be inserted. A less racy version of the show was filmed for sale internationally, so some of the work has been done.
Still, the shows are laden with innuendo that likely will be toned down. Kim Cattrall's randy character, Samantha, no doubt will find much of her oeuvre left on the cutting-room floor. The word "bitch" could easily end up "witch," and the "s" word will probably become "shoot."
HBO executives insist that people who have never seen the show won't realize anything is missing.
DVDs and movies
HBO proved that there is a strong DVD market for TV shows, leading other broadcast and cable networks to follow it.
"The Sopranos," which returns for its fifth season in March, brought in more than $130 million from DVD sales through the first six months of last year, while "Sex and the City" pulled in $66.3 million, according to Adams Media Research. The miniseries "Band of Brothers" is closing in on $100 million.
In fact, the success of the World War II drama on DVD helped lead the History Channel to pay $7.5 million to rerun the show.
Besides DVDs, HBO has branched further into movies that will be released in theaters first, including "Real Women Have Curves," "American Splendor" and "Elephant." It was an investor in the surprise smash "My Big Fat Greek Wedding."
While acknowledging that Time Warner already has two big studios in Warner Bros. and New Line, Albrecht said there is room for HBO to associate itself with small, low-cost movies that will garner critical acclaim and help burnish HBO's brand.