Every over the top service has demonstrated that the value that covers those exact costs PLUS content is 8$ a month.
How can you say that when OTT services clock in at different prices and some even include ads while others do not?
Netflix (for new subscribers) is $9/mo
WWE Network is $10/mo
Amazon Prime (which includes video streaming, music streaming, 2-day shipping, etc.,.) is a little over $8/mo
Hulu+ is $8/mo and has ads
CBS All Access is $6/mo and has ads
HBO Now is $15/mo
UFC Fight Pass is $10/mo (cheaper if you pay for 12mo upfront)
Why does Amazon Prime offer so much for so little? Why is CBS All Access $6/mo when Hulu+ (ABC, FOX and NBC) is $8/mo? Why are the WWE and UFC $10/mo when they only offer a relatively narrow band of niche programing?
There are a multitude of factors that go into pricing and some of them relate to actual costs (ex. how much did it to make the product) and some of them relate to perceived value (ex. how much are people willing to pay for the product?). Why are different brands of beer priced differently yet if I go to a movie theater the ticket prices are the same no matter which movie I see? Why are name brands more expensive than generic brands? Why is a package of M&Ms $1 at the gas station, $8 in the minibar in a hotel room and $0.65 at Costco?
When it comes to OTT services, and this is speaking in generalities, current content (like TV shows that are airing now) and original content will cost more than back catalog content (like old TV shows). Ads, as always, can help reduce the subscription price.
HBO is absorbing the savings from paying commission to telcos rather than passing those savings on to consumers.
HBO is assuming no additional risks whatsoever - it exists exactly as it always did on every TV service at the exact same price.
Of course they are taking on more financial risk and the point of HBO Now is for HBO to make much MORE money than they currently make with cable/sat companies. There's no point to branching out if you are just going to make the same amount, of even just a little bit more, money. Also, HBO is offering convenience to customers (allowing people to access HBO's content w/o needing a cable/sat subscription) and convenience always ups the price.
The cost of your cable plan is irrelevant to the cost of HBO. A proper analogy is how much does HBO (by itself) cost on a cable service.
It's relevant because the only way to get HBO right now is either via HBO Now or in addition to a cable/sat subscription. Comparing how much cable/sat providers pay for HBO and how much customers pay for HBO Now is apples to oranges. With HBO the cable channel, cable/sat providers handle all the billing, tech support, majority of the advertising, etc., and it's a mutually beneficial business to business relationship. With HBO Now, HBO is responsible for it's own servers, own billing, own tech support/customer service, own advertising, own app creation, etc.,. Not to mention there will most likely be a reduced level of partnership with cable/sat providers since HBO now offers a competing service in HBO Now.
What it seems like people want is for OTT services to be so inexpensive that users can build something comparable to their cable/sat bundle but for a fraction of the cost. That's just not going to happen.
For people that want a select amount of programing then a la cart could be cheaper overall than cable (though more expensive per 'channel'). It's like buying soda. A can of soda might cost $1 while a 12-pack might cost $6. A 12-pack is a better value ($0.50 per can vs $1 per can) but if you want less than 6 cans then paying $1 per can is cheaper overall.
A middle ground could be building your own bundle, but cable/sat companies buy bundled content from media companies like FOX or Viacom and that bundled content gets passed on to consumers.
The answer is less than $5. (Divide the bundle cost by number of channels in the bundle).
You assume all the channels in the bundle cost the same amount (which they most likely don't) and that the bundle doesn't involve a discount (which is most likely does).
