HOME BOX OFFICE INC. Harvard Case Solution & Analysis

HOME BOX OFFICE INC. Case Solution

INTRODUCTION

 This report includes a detailed valuation analysis of Home Box Office’s stand-alone value. HBO operates as a subsidiary of Time Warner Inc. HBO is a premium television company as of 31 December 2015. HBO has approximately 49 million domestic subscriber and 82 million paid users internationally, it is the premium channel in the United States for TV shows and movies. It allows users and viewers to download episodes of TV shows, movies documentaries it serve subscribers in the United States, Canada, Asia, and Europe. HBO is the longest and oldest television network in the United States.

HBO’s financial performance was always seen better than its competitors. At one time, HBO introduced a new trend in the market in late 90’s and served as one of the top cable television networks during those times. Very few television channels were that popular, now there are number of television channels in this era of digital disruption. Many companies, which are finding it hard to operate in current fast growing and technology driven media industry are either operating at losses, or receiving bids from stronger companies. Every big corporation in the market is trying to acquire an undervalued or underperforming company. Other than that, they are acquiring to expand further and increase their operational area and reach. TWC, the parent Company of Home Box Office also received many offers for HBO. Now, TWC wants to know the value of HBO and then they will decide whether to sell it or to hold on. Perhaps, they should further expand HBO. This report includes detailed analysis of HBO, its valuation, industry analysis, analysis of comparable company and the assumptions, which are used to calculate terminal value for HBO.

 BUSINESS MODEL AND INDUSTRY OVERVIEW

As it is discussed earlier, HBO is a premium television cable and satellite station. Headquartered in New York, it holds over 90% of the US paid television market, which also reflects its popularity as it has produced very well known TV shows over the past couple of years like Game of Thrones; these shows have highest ratings in the world and a vast viewership across the globe.

When HBO first launched its operations, they were very unique in their own way they started the trend of watching movies at home. Currently it provides high quality streaming, which is non-stop. Viewers can watch whatever like be it movies, TV shows, or documentaries. It runs approximately 12 time shifted channels for different geographical areas. It is also running HBO go, and HBO now; HBO started a national expansion plan with innovation and now they are a prominent satellite station. Its primary revenue comes from subscriptions, they operate on the Ads free model and it is a unique feature of their business model, they do not sell advertising and don’t make shows to sell those advertising, they believe in viewer satisfaction. This is the reason why they are so popular and their viewers are loyal because they show movies or shows instead of TV advertising, this is main reason they are successful. Although this business model also costs them money and they lose revenue from advertising, this business model is also making them popular, which is a critical success factor in the cable and satellite network industry. This loyalty also reflects in its profits where its profits are more than the total profits of CBS, FOX, ABC, and NBC.

Global television industry is mainly divided in to content, broadcasters, distribution and cable networks it is a very dense industry and there is always something new to do with different style as it is a technology driven and all participants of the market always looking for creativity in every aspect of this global industry.................

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