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When Time Inc. merged with Warner Communications in 1989, HBO became part of Time Warner (which as of 2011, continues to serve as the parent company of the network). Coincidentally, Warner Communications had created rival The Movie Channel (now owned by CBS Corporation) in the late 1970s before Viacom, which purchased a 50% stake in The Movie Channel in 1983, bought Warner's remaining half-ownership of that network in 1985.

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In 1987, HBO launched a short-lived channel, Festival. Festival featured classic movies and recent hit movies, along with specials and documentaries from HBO. 

Distinctively, Festival's programmers aimed to provide family-friendly fare; R-rated movies were edited for broadcast and only high-quality series, specials and movies were shown. Also, the pricing for subscribing to the channel was cheaper than HBO and Cinema. Only a few cable systems carried Festival and the channel shut down in late 1988. In 1988, HBO's user base expanded greatly on account of the Writers Guild of America going on strike; HBO had new programming while standard television channels could only broadcast reruns. In 1989, HBO compared programming against pay-television network Showtime, with the slogan "Nobody brings it Home Like HBO", using the Tina Turner single The Best.

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In 1983, HBO's first original movie and the first made-for-pay-TV movie The Terry Fox Story premiered. That year also saw the premiere of the first kids' show broadcast on the channel: Fraggle Rock; HBO continued to air various original programs aimed at children until 2001, when such programs were almost completely moved over to HBO Family.HBO became involved in several legal suits during the 1980s these involved cable systems and legal statutes imposed by state and city laws that would have censored some programming on HBO and other pay-TV networks. In January 1986, HBO also became the first satellite network to encrypt its signal from unauthorized viewing by way of the Video cipher II System. 

Four months later, HBO became a victim of broadcast signal intrusion when satellite TV dealer John R. MacDougall, a man calling himself "Captain Midnight", intercepted the network's signal during a movie presentation of The Falcon and the Snowman. The Federal Communications Commission subsequently prosecuted MacDougall.

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The network had broadcast only for nine hours a day for its first nine years on air, from 3 p.m. to midnight ET. In September 1981, HBO began broadcasting a 24-hour schedule on weekends, until midnight ET on Sunday nights. On December 28, 1981, HBO expanded its programming schedule to 24 hours a day, seven days per week (Cinema had a 24-hour schedule from its launch, and Showtime and The Movie Channel went to a 24-hour schedule earlier). 

On August 1, 1980, HBO launched a companion network, Cinema, a movie-based pay service created as HBO's answer to The Movie Channel; in its early years, Cinema carried music specials and some limited original programming such as SCTV and Max Headroom, in addition to movies, but the network has since become known for airing soft-core adult films and series during its late night schedule, and has forayed into original programming with the addition of weekly action series to its lineup in August 2011.

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HBO is an American premium cable television network, owned by Time Warner, under the operating subsidiary Home Box Office Inc. As of September 2012, HBO's programming reaches approximately 30 million subscribers in the United States, making it the second largest premium network in the United States (Encore's programming reaches 35 million subscribers as of January 2013). In addition to its U.S. subscriber base, HBO also broadcasts in at least 151 countries worldwide.

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On September 30, 1975, HBO became the first TV network to continuously deliver signals via satellite when it showed the "Thrilla in Manila" boxing-match between Muhammad Ali and Joe Frazier.HBO switched its domestic satellite transmissions from Westar 1 to Satcom 1 in February 1976 and by 1977 was joined by Ted Turner's Atlanta superstation WTCG-TV (soon to become WTBS) and Pat Robertson's Christian Broadcasting Network later to become the present-day ABC Family, laying the foundation for satellite delivery in the modern cable television industry.

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September 1973 Time-Life, Inc. completed its acquisition of the pay service. HBO soon became the fastest-growing TV pay-service in America, but it had an exceptionally high churn-rate. Subscribers would sample the service for a few weeks, get weary of seeing the same films, and then cancel. 

HBO struggled, and something had to be done. When HBO first came to Lawrence, Massachusetts, it offered subscribers the opportunity to preview the service for free on channel 3. After a month, the service moved to channel 6 and broadcast scrambled. The preview proved popular, obtaining many subscriptions, and the concept also went into operation elsewhere.

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Sterling Manhattan Cable lost money because the company had only a small subscriber-base of 20,000 customers in Manhattan. Dolan's media partner, Time-Life, Inc., gained 80-percent control of Sterling and decided to pull the plug on the Sterling Manhattan operation. Time-Life dropped the "Sterling" name and the company became "Manhattan Cable Television" under Time-Life control in March 1973. Gerald Levin replaced Donal as HBO's President and Chief Executive Officer. 

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Dolan presented his "The Green Channel" idea to Time-Life management, and though satellite distribution seemed only a distant possibility at the time, he persuaded Time Life to back him. Later, on 8 November 1972, "The Green Channel" became "Home Box Office (HBO)". 

HBO began using a network of microwave relay towers to distribute its programming. The first program and film broadcast on HBO, Sometimes a Great Notion (1971), starred Paul Newman and Henry Fonda and was transmitted to 325 customers at a CATV system in Wilkes-Barre, Pennsylvania (Wilkes-Barre's downtown Public Square features a plaque commemorating this event). HBO broadcast its first sports-event immediately afterwards: an NHL hockey game from Madison Square Garden featuring the New York Rangers and the Vancouver Canucks. 

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Development and launch

In 1965, Charles Dolan, who had already done pioneering work in the commercial use of cables, won a franchise to build a cable system in Lower Manhattan in New York. The new system, which Dolan called Sterling Manhattan Cable, became the first urban underground cable-system in the United States. 

Rather than stringing cable on telephone poles or using microwave antennas to receive the signals, Sterling laid underground cable beneath the streets of Manhattan - because the multitude of tall buildings blocked television signals. In the same year Time-Life, Inc. purchased 20 percent of Dolan's company.