1 Catch HBO Fans Should Know About It's New Service

Cord-cutters looking to get their Game of Thrones fix through HBO's new over-the-top service, HBO Now, are out of luck if they don't have an Apple device with which to sign up. The Time Warner subsidiary inked a deal with the tech giant for a 90-day window of exclusivity. While subscribers will be able to access the service through any computer with a web browser, they'll need an Apple device for the initial sign-up process.

Source: Apple keynote.

From the looks of it, this is a win-win for both HBO and Apple. (Potential customers might be upset, however, and GoT might continue to set piracy records this spring.) Let's take a look at how this exclusive window benefits each company, and what the future holds for HBO Now.

"We love HBO" -- Tim CookOf course Tim Cook & Co. love HBO. It was kind enough to offer an exclusive deal for one of the most anticipated media products of the year, and Apple is no doubt getting a cut of the subscription revenue.

Apple typically takes a 30% cut when it sells content subscriptions through its various App Stores. But Apple has worked out more specific deals with other subscription services in the past, such as Netflix and Major League Baseball. With HBO used to leaving 50% on the table for pay-TV operators, it's likely Apple is taking a similar cut for HBO Now sign-ups.

What's more, even though the exclusivity only lasts for a limited time, it adds another selling point to its products like Apple TV and iPad -- where Apple really makes its money. (It didn't build a $200 billion empire selling subscriptions.) With iPad sales falling, and intense competition from a growing number of set-top box makers, Apple could certainly benefit from a quarter with a distinct advantage in content.

HBO gains some valuable leverageHBO built its business by leveraging its partnerships with pay-TV operators. Cable companies handle customer service, distribution, and marketing, and HBO focuses on producing great content (and stacking cash).

The deal with Apple looks to offer similar advantages for HBO. In exchange for a sizable portion of the relatively hefty subscription price, Apple will probably market HBO by placing it front and center in its own product ads and in its App Stores.

More importantly, though, the deal provides leverage against the cable companies. Cable companies are exempt from the exclusivity clause in the Apple agreement, meaning Apple could be joined by any of the major Internet-service providers. So far, none of the ISPs have offered to bundle HBO with their broadband service. With Apple, HBO is sending the message that it's going to go over-the-top with or without the help of the cable companies.

Additionally, HBO has been frustrated lately with pay-TV operators' marketing strategy and hostilities toward HBO since the company announced plans to go over-the-top in October. Earlier this month, Comcastblocked the HBO Go app on PlayStation. Instead, the cable company directs users to its Xfinity Go app, which just acquired the rights to distribute HBO. This is the kind of behavior HBO hopes to end with HBO Now.

What it means for investorsThe exclusive launch of HBO Now is undoubtedly great news for Apple. It has an opportunity to generate millions of dollars in subscription revenue every month and draw more people into its ecosystem.

For Time Warner, it carries a bit of a risk. The company is risking further alienating partners that had previously been its most ardent supporters. On the other hand, it could benefit from the leverage provided by sidestepping pay-TV operators altogether.

Even if HBO Now does succeed with or without cable companies' help, it could cannibalize Time Warner's other cable networks, which generate more than $5 billion in carriage fees charged to pay-TV operators.But with millions of households foregoing a cable subscription, and that number rising every quarter, the opportunity has gotten too large for HBO to ignore.

The article 1 Catch HBO Fans Should Know About It's New Service originally appeared on Fool.com.

Adam Levy owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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