In the past, HBO was able to drive subscriptions for their services based on the fact that they were a special premium product. Whether through buzz about their shows, awards their shows garnered, or the enabling of a few days a year of allowing users to sample their content, they were able to drive subscribers. Now that the other premium cable networks, like Showtime and Starz, have gotten into the production of buzz and award-worthy original shows, HBO has to change their traditional ways. One of those is HBO’s entry into their own form of the Freemium model. Freemium is generally the term used for product that are attained for free and then continued usage requires payment, or premiums. HBO’s version consists of them making the pilots of their new shows – GIRLS and VEEP – available on HBO.com, YouTube, DailyMotion, TV.com and multiple distributors’ free on-demand platforms the day after their premieres. The shows will also be available as free downloads on iTunes. To me, this is a smart model for HBO to induce viewers to move from freemium to premium and subscribe to the premium cable network to get their fix of those shows.
Of course, they’ve got to hope that the shows are good enough to compel viewers to actually want to pay to see more. This model is probably a stronger one than the limited opening of the FreeView windows they’ve done in the past. From a television programming perspective, I would even allow for more than just the pilot episodes to be streamed for free. As it takes a couple of episodes to become truly engaged, they should probably look to make three episodes available. The Freemium model is proving to be more and more successful as time goes on and HBO’s foray into that style of marketing or sampling could be a sign for the future of products that are not traditionally associated with that Freemium way of engagement.
In the music sector, Spotify has certainly established itself strongly on the freemium model, but the uptake to premium is an unscientific process. The numbers reported in a Billboard article covering 2010 and early 2011 showed a slow uptake, but that was before they launched in the US and picked up steam in their existing markets. Even with that, users are running into issues as people start interacting with the product and deciding whether they want to shell out the money for the premium model. Spotify reports that since launching in the States in June of 2011, they have 3 million users, with only 20% subscribing.
On the gaming front, the poster child for the Freemium model is ANGRY BIRDS. They most recently launched on Facebook in February – where playing is free, but the opportunities to power-up or get other additional gameplay benefits comes with a cost. This incremental revenue may just be a flash in the pan as we see whether Facebook users actually care to purchase additional powers, but they don’t seem to be hurting amidst all their other growth on multiple platforms that all effectively launched on either the true freemium model (limited level gameplay with payment for more) or a nominal premium for slightly robust access and the payment opportunities for even more.
The freemium model across the board is increasing and revenues are driving up. Steve Smith wrote about it on his MediaPost blog recently. Smith cites an IHS Screen Digest Mobile Media Intelligence Service report that projects that Freemium will drive 64% of app revenue by 2015.
I give HBO credit for trying something different as a strategy to remain above the competition in an ever-tightening race with more and more outlets for the type of content they are known to provide. Will this lead to other businesses to delve deeper into their own forms of the Freemium model? If so, it’s got to be more compelling that what might have been a very early form of Freemium – giving away free food samples in stores hoping that consumers will buy. Regardless of the product, there’s got to be a real desire by the end users to get more. Hopefully, for HBO, these shows are good enough to drive that craving for more.