Loss Leaders

How do you get someone to try your amazing product? Advertisements can only go so far and your grandma can only download your product once. To solve this problem, a lot of companies are creating amazing content, knowing that they will lose a lot of money, in the hopes that people will use their product and purchase something else.

This is called a loss leader. One of the best examples of this is Game of Thrones by HBO. HBO spends millions of dollars on each Game of Thrones episode, yet it is glad to do it. Recently, Season 7 of Game of Thrones came out and HBO’s streaming app, HBO NOW was downloaded over 500,000 times! This translated into a huge increase in subscription revenue, making it the top grossing non-game app. It did so well, that it became the highest grossing app in all categories and only lost to candy crush saga and clash of clans.

Unfortunately, the ride won’t last long. Once Game of Thrones ends, a majority of these subscribers will cancel their membership until the next season premiers. To combat this problem, HBO will need to keep their customers engaged and keep them hooked on their cheaper programs. HBO has Westworld, Girls, and a slew of movies.

If they continue to create great products and keep the users engaged, then a loss leader is worth it. Otherwise, it will just be a waste of Lannister money.

Looking forward to the future, the possibilities are endless.