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Business Operations Business Models

How Does HBO Make Money (Business and Revenue Model)

The HBO business model

How Does HBO Make Money?
Here’s what you should know:
  • What is HBO, and how does HBO work?
  • How does HBO make money?
  • Subscription Service (HBO and HBO Max)
  • Content Licensing
  • Selling Merchandise
  • Advertising
  • HBO’s profit and revenue
  • What is the HBO business and revenue model?
  • HBO’s Subsidiaries, Acquisitions, and Exits

How does HBO make money? Here is a full, in-depth, breakdown of their four (4) revenue streams and the different products and services they offer, as well as the HBO business model, their year-over-year revenue, and how HBO works.

What is HBO, and how does HBO work?

HBO, a subsidiary of WarnerMedia, is an American subscription-based television network.

Founded in 1972 by Charles Dolan, HBO’s programming is now sold in more than 155 countries worldwide with more than 67.5 million subscribers globally.

How HBO works is: HBO is a subscription-only network and requires a subscription to watch its content. Once a user chooses a plan, they get access to seven 24/7 channels with more than 10,000 hours of HBO content.

Some of HBO’s competitors include SHOWTIME, Cinemax, Starz, and other premium cable and television networks.

HBO App in Apple App Store | HBO Business Model | How Does HBO Make Money?
Source: Apple App Store

How does HBO make money?

According to page 2 of AT&T’s Q2 2021 News Release, the company has more than 67.5 million subscribers globally. So how does HBO make money off of all these subscribers?

Below is a breakdown of how much money HBO makes and its revenue model. Including all revenue streams and how much they charge for their services.

Here are the 4 ways of how HBO makes money (in 2021):

HBO has a revenue model that makes money in four (4) ways – subscriptions, content licensing, selling merchandise, and advertising.

#1. Subscription Service (HBO and HBO Max)

HBO makes the majority of its money through its subscriptions. In fact, according to page 25 of AT&T’s 2020 Form 10-K, HBO had earned roughly $6.1 billion or 89.45% of their total revenue from subscriptions alone in 2020.

Ending 2020 with nearly 61 million subscribers, HBO currently has 67.5 million subscribers globally as of Q2 2021 and is projecting to hit 120 million to 150 million by 2025, says AT&T.

HBO and HBO Max Cost:

  • $9.99 to $14.99 per month
HBO and HBO Max Cost | HBO Business Model | How Does HBO Make Money?

Note: 89.45% of HBO’s total revenue came from subscriptions in 2020.

#2. Content Licensing

In addition to subscription revenue, HBO makes a bulk of the rest of its money through the licensing of its content to other networks and streaming services.

What is content licensing and how does it work? HBO, the intellectual property owner of its content, licenses out its TV shows to other networks and in return receives money, usually in the form of a royalty or flat fee.

According to page 25 of AT&T’s 2020 Form 10-K, “content and other” including content licensing resulted in roughly $718 million of revenue in 2020.

#3. Selling Merchandise

HBO also makes money by selling licensed merchandise of their HBO original shows like Game of Thrones, The Sopranos, and Euphoria, through their HBO Shop.

#4. Advertising

In June 2021, HBO introduced a new cheaper tier of its HBO Max subscription plan – HBO Max with ads.

This $9.99 per month option is $5 cheaper per month but has commercials. HBO mentions that users “can expect to see about 4 minutes of ads per hour.” Within those ad blocks, HBO makes money off of this by selling ad placements.

HBO’s profit and revenue

In 2020, HBO reported $6.8 billion in revenue.

Note: Because AT&T Inc., the parent company to WarnerMedia and HBO, is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of AT&T’s publicly released financial reports, including annual reports, through AT&T’s investor section on their website.

What is the HBO business and revenue model?

HBO makes money through a few revenue models that they combine within their company, they are:

  • Subscription business model
  • Advertising business model
  • Licensing business model
  • Transaction based business model
  • Mergers & acquisitions (M&A) business model

HBO’s Subsidiaries, Acquisitions, and Exits

To date, Home Box Office Inc. (HBO) has made a total of 4 investments, 1 lead investment, and 1 successful exit.