Hbo was never free in the way some people think of it.
In 1975, with the use of satellites, HBO begin broadcasting to cable head ends using satellites.
No one or very few people had a large enough dish for c-band back then.
Instead of a satellite scrambling method, HBO just kept its signal in the clear to make it easier on Head ends, however cable companies still had programming contracts with HBO, that were not free in any way. Customers who had cable TV still had to pay for HBO.
It was not until the very early 80s after satellite TV technology started to become cheaper due to demand picking up, did prices lower enough for consumers to afford systems.
Also technology made it possible for a 10 to 12 foot dish to pickup the signal instead of a 16 foot+ dish due to early LNA's being very week and needing a large reflector to gather enough signal.
C-Band satellite TV started becoming popular in 1980/1981 and thousands of people were hopping on the bandwagon, by the Mid 80s hundreds of thousands of people had Satellite TV systems up and going.
HBO saw this as a major loss of profit because almost a million people were viewing its signal free of charge, something that cable TV consumers had to pay for.
If more people switched from cable to Dish, then even more people would be viewing HBO's signal for free, and cable headends would loose money, and so would HBO.
So, HBO and "skinemax" started to charge home satellite owners for the programming, and others followed suit.
Thus scrambled TV was born, however it was no where near as scrambled as it is today, there used to be tons of channels ITC.
Of course, if one pays for something, one tries to learn how to get it for free, and thus the VC-2 Hack was born. There was a lot more hackers then you think, due to the fact the dealers for the equipment, instead of explaining that its morally wrong and illegal, told consumers that it was not hacking, but "testing", and also a fun and exciting thing to do, to try and decode a scrambled encryption.
But getting back on subject, If HBO continued to have it's signal in the clear, I think that would of killed the company, all premium movie channel companies for that matter.