Current HBO subscribers = 28M
Revenue per subscriber = $5
Households that can support HBO Go = 5M
Revenue per subscriber = $15
Assume 100% of eligible households subscribe.
(28M * -5 * x%) + (3M * 15 * 100%) = y
x = 32.14%
For y to be positive (net gain for HBO), the chance that cable companies drop HBO needs to be less than 32%.
If we assume HBO Go adoption rates are the same as cable subscribers (26.6%), that means 800k subscribers.
(28M * -5 * x%) + (800k * 15 * 100%) = y
x = 8.57%
For HBO to have a net gain, the chance that cable companies drop HBO needs to be less than 8.5%.
Another way to put it, in order to risk $140M to gain $12M you need to be more than 91% sure.
It's worse since HBO's subscriber fee is closer to $8 per user per month. It's the most expensive cable channel on a per user fee basis. ESPN is around $4 per user.
If we assume HBO Go adoption rates are the same as cable subscribers (26.6%), that means 800k subscribers.
For HBO to have a net gain, the chance that cable companies drop HBO needs to be less than 8.5%.Another way to put it, in order to risk $140M to gain $12M you need to be more than 91% sure.