In 1972, Time Inc. opened HBO as a cable TV services provider. HBO received $3.50 a month from the $6 monthly subscription fees paid by clients who receive the films transmitted to their TV sets via satellite.
The cable industry saw an expanding infrastructure in the mid-70s, reaching the major cities in the US like New York and Boston. From a subscriber base of 50,000 in 1974, it grew to nearly 1.5 million in 1978.
Time Inc. purchased the second-biggest cable service provider American Television & Communications Corporation (ATTC) for $145 million in 1978. At that time, ATTC has a client base of 675,000 subscribers. To increase its competitiveness, HBO spent another $35 million for a chunk of 40 MGM/United Artists films.
In its effort to compete with low-priced competitors like Viacom’s Showtime, HBO opened Cinemax in 1980. Slowly, HBO’s clients climbed to 9.8 million in 1982. Sales increased to $440 million where HBO earned $1000 million.
That same year, HBO forged a venture with Columbia Pictures giving rise to a new film outfit in 40 years – the Tri-Star Pictures. HBO received the TV rights to all films produced by Tri-Star.
Cable sales slowed down in 1984 due to the absence of cable system infrastructure in many key US cities like Baltimore, Philadelphia, Chicago and Detroit. More and more consumers opted to rent videos from movie rental shops. Despite the slump, HBO managed to maintain 14.6 million subscribers and earn $800 million.
Analysts started to predict that the industry of pay-TV would soon end. Pay-per view options and video rental shops threatened HBO’s existence. HBO began spending large amounts for advertising. It also began tapping overseas markets. The strategy proved fruitful and helped maintain its earnings.
HBO continued as a premiere cable service provider in the US and many countries around the world.