Time Warner Inc's HBO will launch a standalone online streaming service next year to make hit shows such as Game of Thrones available to people who do not subscribe to cable television.
The move to take HBO "over-the-top" - media jargon that means consumers can watch the channel with only a broadband connection - is a significant milestone for a channel long dependent on cable distributors.
It could be a further catalyst spurring more people to dump their cable subscriptions by cutting the cord. It could also prompt other media companies to follow HBO's lead.
HBO's chief executive, Richard Plepler, announced the move during an investor day on Wednesday where Time Warner's other top executives laid out plans to boost the company's growth.
"In 2015 we will go beyond the wall and launch a standalone, over-the-top service with the potential to produce hundreds of millions in revenue," Plepler said, making a reference to HBO's massive hit show "Game of Thrones."
"We will use all means at our disposal to grow. This is the most exciting inflection point both domestically and internationally in the modern history of HBO."
Plepler cited that 10 million homes in the United States are broadband-only, without cable subscriptions. Half of those homes subscribe to streaming video services. "These consumers have no access to HBO. It's a large opportunity that should not be untapped," he said.
Shares of Time Warner, also home to movie studio Warner Bros and cable network channels Turner Broadcasting, rose 2.2 percent to close at $72.21, still short of the $85 per share offer from Twenty-First Century Fox Inc which it rejected over the summer.
Streaming video provider Netflix Inc, which announced quarterly results on Wednesday, said it had long viewed HBO as its top competitor.
"It was inevitable and sensible that they would eventually offer their service as a standalone application," said Netflix Chief Executive Officer Reed Hastings in a letter to investors. "Many people will subscribe to both Netflix and HBO since we have different shows, so we think it is likely we both prosper as consumers move to Internet TV."
Plepler did not disclose the price or other details about the forthcoming service. HBO currently allows cable subscribers to access its content - including popular shows like The Sopranos and Sex and the City - on mobile devices through an app known as HBO Go.
HBO's announcement comes as Time Warner feels pressure to boost its share price after it rebuffed an $85 per share offer from Rupert Murdoch's Twenty-First Century Fox in August.
DISRUPTING THE ECOSYSTEM
Time Warner executives emphasized the new service will not cut into the existing lucrative revenue stream with cable distributors and that HBO Go will crack open new markets. The fear of cable distributors is that consumers will drop more expensive cable and satellite packages in favor of cobbling together their own bundle.
Plepler said that distributors are looking for opportunities to increase their business, and that premium content is one way to do that.
"I have spoken to almost every CEO of every major distributor. I don't think anyone is upset, it's their broadband and their ISP. I don't believe any of these things are mutually exclusive."
Still, setting HBO free could further upset the content-distributor ecosystem, as other media companies mull similar options with their channels.
"Cable programmers like Viacom and A&E are thrilled that HBO is shining a light down a path they may all have to contemplate in the future," wrote James McQuivey, an analyst with Forrester Research.
Pay TV networks Starz and Showtime have indicated they would like to move in a similar direction. Showtime, a unit of CBS Corp, said in a statement on Wednesday that a standalone streaming video service is "something that we have been examining for some time."
Starz on Monday announced plans to sell a direct-to-consumer streaming video service called Starz Play in Latin America, West Africa, the Middle East and Asia, starting next year.
(Reporting by Jennifer Saba; Additional reporting by Lisa Richwine in Los Angeles, editing by Matthew Lewis)