STATE OF THE UNION - The success of HBO, the channel that brought you Six Feet Under and The Sopranos, shows that elevated programming can be profitable.

by Nick Denton, publisher of Gawker -
Last Updated: 31 Aug 2010

The success of HBO, the channel that brought you Six Feet Under and The Sopranos, shows that elevated programming can be profitable.

As a disciple of the free market, I have always had an ambivalent attitude towards state-supported culture. It was easy to ridicule European intellectuals and their belief in taxes on the poor to pay for opera and highbrow current affairs programmes for the middle classes. Who appointed them arbiters of cultural taste? What right did they have to dictate the entertainment of the masses?

But then one actually had to watch the stuff - Dallas, Dynasty, Neighbours and lately the reality television shows that dominate prime-time across the western world. The intellectual case for free choice in entertainment is easy; the cultural consequences appalling, obscured only by the rhetoric of cultural egalitarianism.

All cultural value is in the eye of the beholder, I would say. Big Brother is no less 'valid' than Panorama. As if I believed it.

Channel 4 helped, of course. A private channel in the UK that attracted upscale viewers, and the advertisers that love them. It proved that profit and prestige were compatible. But Channel 4 was a monopoly, and was constrained by the terms of its licence to broadcast edgy programming.

There was still no proof that culture could survive in an entertainment free-for-all.

So, thank heavens for HBO. The US premium cable channel is best known outside the US for shows such as Sex and the City, which embrace the sexual content that America's prudish networks shun. The Sopranos, the series by David Chase about the mundane and violent lives of New Jersey mafiosi, is as gripping as a great movie. I saw the first series - 13 hours of programming - in one sitting, and sank into depression once it was over.

And Six Feet Under, a family drama set largely in a funeral parlour, breaks all the rules, displays huge ambition, and largely succeeds.

When the cultural history of the early 21st century is written, The Sopranos and Six Feet Under will surely feature. They are as lavish as many Hollywood movies, and far more profound. HBO hogs television's awards; it won 24 Emmys, as many as NBC, the best of the networks. All of which gives the channel the right, without being laughed at, to make the boast: 'It's not television. It's HBO'.

To be sure, HBO does not stand alone; it is part of the AOL Time Warner media group. In the 1980s, the channel built its audience on cheap but risque programming, many of the same sex documentaries that aired late-night on Channel 4. It still only 'programmes' for one night, Sunday; re-runs and bought-in movies populate the rest of the week. A hit show such as Six Feet Under still only attracts five million viewers, a fraction of the audience for the most popular reality shows. And HBO's success has been a long time in coming.

However, now HBO supports AOL Time Warner, not the other way round. In 2001, the channel generated about dollars 725 million in operating profits, on revenue of dollars 2.6 billion. As HBO's brand recognition improves, it is able to strike better deals with cable carriers. It is a key element of most premium cable packages. In addition to subscription revenues, the company is expanding sales of DVD boxed sets, distributing shows on a pay-per-view basis, and syndicating to advertising-supported networks.

So commercially successful is HBO that it is now the model for other AOL companies. Jeff Bewkes of HBO was last year named chairman and chief operating officer of the group's entire entertainment division. And by bundling together content offerings into one subscription, the AOL online service is trying to emulate the cable channel.

The broader lessons are more interesting. HBO's success shows that, under the right circumstances, elevated programming can be profitable. Culture may not require regulation, quotas or public subsidy. What case for public support of the BBC in the UK if the market can provide for cultural snobs?

America is different, of course. The television audience is four times that of the UK, which means that even a small audience share can translate into significant absolute numbers. Cable television is much more established in the States, and viewers are therefore familiar with a multiplicity of channels, and expect to pay for some of them.

However, the underlying trend is universal. As digital, cable and satellite distribution becomes the standard, the carriage costs to programmers fall.

Digital systems also allow pay-per-view offerings - which can be accessed at the click of a remote - in addition to monthly subscription packages.

And DVD sales provide additional revenues. HBO's commercial strength shows how the economics of elite programming have shifted; the cultural bureaucracies of Europe, in justifying their own existence, can no longer point with disdain to the wasteland of American television.

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