In last Friday's podcast, Colin and I covered a lot of ground in assessing HBO Now's opportunities and risks. One of the points I raised, which I believe deserves much more attention in understanding HBO Now's disruptive potential, is how it threatens pay-TV's multi-billion dollar "sports tax" on non-fans.

I've been writing about the sports tax - how non-fans effectively subsidize the cost of super-expensive sports networks such as ESPN and regional sports networks (RSNs) that they don't watch - for almost 5 years now. In a back-of-the-envelope analysis I did following a panel I sat on with Mark Cuban back in 2011, I estimated the annual tax on non sports fans amounted to at least $2 billion per year (4 years later, it's now much higher).

The sports tax arises because expensive sports networks are included in the basic tiers of service most of the 100 million pay-TV homes in the U.S. subscribe to. So non-fans and even casual fans, who may either never watch a single during the year, or only sporadically tune in, effectively subsidize the cost of these expensive networks month in and month out. To give a sense of the scale of this subsidy, back in 2011, industry analyst Craig Moffett estimated that 50% of a pay-TV operator's programming cost is sports related, yet just 20% of audience time viewing is sports related.

Nonetheless, with TV executives frantic about trends in time-shifting and ad-skipping, live sports have come to be perceived as a firewall for advertising and the pay-TV bundle. As a result, we've seen broadcast and cable TV networks ante up tens of billions of dollars for long-term sports rights deals in the past several years (back in '12, I estimated it at $80 billion in commitments, but it's even more now).

When you read about the incredible salaries and bonuses commanded by NFL free agents in the past couple of weeks (or any other pro athlete), or the multi-billion valuations of pro franchises, all of it can be traced to the lucrative TV deals. Of course, the dirty little secret is that it's actually been the NON-FAN who's been paying a lot of the freight because he/she is charged every month, irrespective of how little sports he or she actually watches.

So why is HBO Now such a threat to the sports ecosystem? Because it give non-fans (or "entertainment-only" viewers as I like to call them) the most robust choice of entertainment content yet. HBO's decision to make ALL of its programs, back to their pilots, available in HBO Now means iconic shows like "The Sopranos," "Game of Thrones," "Sex and the City," "The Wire," "Girls," "Deadwood," "Treme" and so many others will now be available to entertainment-only's to binge-watch for just $15 per month, WITHOUT having to first subscribe to an expensive basic pay-TV service.

To provide just one measure of how popular HBO Now could become, consider the growth of Netflix, to nearly 40 million U.S. subscribers, the biggest of all OTT services. Netflix is an entertainment-only service, with no sports at all. And though it has licensed a slew of great programs, and recently rolled out its own originals, its catalog for mature audiences doesn't come close to HBO's, which has dominated the Emmys for years.

For the entertainment-only viewer, any combination of Netflix, HBO Now, Hulu Plus, Amazon and a smattering of ad-supported online video from YouTube and other ad-supported or subscription services provides the best TV that's EVER been available without a pay-TV subscription. Critically, it does so for a monthly price far less than the cost of pay-TV, even after accounting for broadband service.

When HBO's CEO Richard Plepler announced HBO's OTT plans last October, he stressed that they would be targeted to the 10-15 million broadband-only homes in the U.S. (though he did note that there are 80 million U.S. homes that don't have HBO and "we'll use all means at our disposal to go after them").

I'm guessing that if HBO had its druthers it would like to see HBO Now only pull from the broadband-only universe (so-called "cord-nevers"). But I don't think that's what's going to happen. More likely is that HBO Now is going to attract some of the existing 70 million or so pay-TV subscribers who don't currently subscribe to HBO (and maybe even some that do). Lots of these people have pent-up interest in HBO's programming but have been unwilling or unable to spend another $15-20/month on top of their expensive basic pay-TV service to get HBO, which is why HBO's U.S. subscriber base has been stuck at around 30 million for years.

Netflix has paved the way for HBO Now's appeal, because many of these entertainment-only viewers have already either subtly or explicitly realized they've shifted their nightly viewing from pay-TV to Netflix (as evidenced by last week's Nielsen data showing linear TV's declines). HBO Now, with its compelling programming and powerful brand, is unquestionably the most important new OTT service coming to market. It will draft off of Netflix's momentum and help drive a decoupling of entertainment-only viewers from the sports-driven pay-TV ecosystem.

Does this mean cord-cutting is poised to skyrocket? No. But it does mean the tentative equilibrium that pay-TV has achieved over the past couple of years, losing just 220K subscribers, or .2% of its base - all while OTT has boomed - is going to be under more pressure than ever and we should expect to see the numbers reflect this in coming quarters.

HBO has understandably been reluctant to pursue an aggressive OTT strategy given its own dependence on pay-TV operators for the vast majority of its revenue (not to mention corporate sibling Turner Broadcasting, which is similarly dependent, and also just signed a 9-year, $11 billion deal with the NBA last Fall). Yet, HBO and Time Warner executives must have recognized viewers' changing behaviors and determined, once and for all, that they needed to offer a more competitive way to access HBO's content.

As I've observed the rapidly rising cost of sports programming over the recent years and the growth of Netflix, I've been convinced there's a mile-wide opportunity to address entertainment-only viewers with more cost-effective solutions than pay-TV does. HBO Now is a big step toward doing so. It's a huge new threat to the pay-TV and sports ecosystems, in particular threatening the sustainability of the sports tax on non-fans.

(Update: See below, I just noticed a huge leaderboard ad HBO has running promoting HBO Now, with the tagline "Soon…All You'll Need is the Internet to Get HBO." No doubt meant to appeal to broadband-only's, but likely to also resonate for some pay-TV subscribers too.)