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Netflix Comparisons to HBO are Misleading

By Jacob Klein on Oct 22, 2013 to HBO News

HBO Netflix

Reports of HBO’s death have been greatly exaggerated.

The so-called rivalry between HBO and Netflix continues this month as the entertainment and tech blogospheres nearly exploded yesterday with headlines of “Netflix Now Has More Subscribers Than HBO” and “Netflix Beats HBO in Subscribers“.  The news comes as no surprise to those paying attention to the evolution of television as Netflix continues to grow.  There is no doubt that streaming video and a la carte media a major part of the future TV landscape.  But as one of those individuals who follows these news items for a living I found there to be a few gaping holes in these breathless reporter’s logic bubbles.

 

We only count ‘merican money round here!

printing money 288 300x300To be fair many of the Netflix subscriber reports had it right, using headlines that limited the count to US subscribers.  But while some went on to explain the international discrepancy, many more didn’t.  Here are the facts:  If we count HBO subscribers around the world (and I fail to see a reason to ever not include “the world”) HBO has a total more akin to 115 million subscribers and Netflix, while growing, doesn’t generate as much revenue outside the US border.  Here’s Netflix’ CEO relinquishing that very point:

“We have a long way to go to match HBO’s 114 million global member count or their well deserved Emmy leadership. Title by title, device by device, member by member, award by award, country by country, we are making progress.”

So while some journalists do see the big picture, tragically others did not.  Let’s not forget about “everyone else in the world”, America. Particularly when it comes to counting business revenue.  HBO is a global company while Netflix is not so much to date.

 

An HBO subscription costs at least twice as much a Netflix subscription

This is an easy one.  A Netflix subscription is about $8 while an HBO subscription is at least $16.  I’m not sure if, as a consumer, you see this as a good thing or bad thing for HBO but it needs to be considered.  The market has determined that HBO’s content is worth about twice as much (or more) as Netflix’ right now.

 

Don’t forget about Apple, Google, Amazon, Comcast and Hulu

While we’ve seen this David and Goliath story play out in the tech world several times in the past, I wouldn’t count the big boys out just yet.  If the main attraction at Netflix is the fact that they stream video, they’re not the only interested party.  Apple, Google and Amazon are all in that game and are playing for keeps.  Amazon is striking up deals with major labels and creating its own original content.  Google recently partnered with HBO to bring its original programming to that platform and Comcast and other cable providers are moving towards “TV Anywhere” applications as well.  While Netflix has a head start, companies like Comcast or Viacom may just decide that they can make more money on their own, proprietary application (as HBO, ShoTime and others have already done).  Netflix depends on AMC, NBC, ABC, Bravo and every other network to accept the small fees they pay for their content.  At some point, this may not work in their favor.

160 Features tech war 5

This is why Netflix is moving towards original programming.  To hedge against AMC, NBC etc pulling out completely.  It’s not a sure bet at all that Netflix will win this war against their real competitors Amazon, Apple, Google etc.  At the same time I certainly wouldn’t bet against them and in a way, I’m rooting for them.  Cheap a la carte TV would be very consumer friendly (though I doubt it will remain 8 bucks forever) and this consumer would love to have a lower cable bill.


Apples & Oranges

apple orangeWhile there are certainly piles of articles comparing the two companies as of late, HBO and Netflix are hardly apples and apples.  One has been creating original content for 40 years.  The other started 18 months ago.  And while this is an exciting time with the Netflix Emmy nod, it remains to be seen whether Netflix’ foray into original (re: expensive to create) content is actually profitable for them.  A few bad programs here at the beginning of Netflix’ original content experiment may leave them sunk. 

In the end Netflix is essentially a DVD a rental company with a not insignificantly smallish streaming service that looks to mimic what most think the future holds for TV.    Full of promise, yes but not something other content creators can’t do themselves with their own internal development studios.  HBO is a premium content creation engine with a track record of redefining popular culture every few years.  This is much harder to mimic than is a video streaming host.  In fact most networks do this already at some scale or another.


It’s not Either/Or.  There’s room for more great content for all!

This author is actually a Netflix subscriber who is rooting for Netflix, or something like it to succeed.  We can ring the bells and say “the British are coming!” but it doesn’t mean that day is here just yet.  Television is about to go through a revolution, no doubt in the next decade.  But will Netflix lead the way?  Or will Google, Amazon and others have a say in that future as well?  HBO certainly isn’t going anywhere in the next decade or so with 5 more seasons of Game of Thrones, some Boardwalk Empire and a smattering of other new shows on the way (can you tell we’re an HBO fan blog yet?).

As Rob Toledo of the Netflix fan site “Best of Netflix” puts it:

Both content providers seem to have an upper hand on most [of the] competition [in terms of award winning original content], even over other premium and streaming services. Hulu, for example, has struggled to land a major hit.

Look: streaming video is the future of media consumption.  No doubt.  That’s why HBO was one of the first networks in the world to create their own universal app.  The futurists are right: streaming video and device neutral media is happening quickly.  But the amateur futurists and TV anarchists are simply wrong if they think Netflix is going to run the table as television evolves.  TV is a big place.  There’s been room for gigantic networks, multiple cable operators and ancient, free networks alike.  The age of device neutral, consumer choice online media will be no different.  For me, that competition is a good sign for the future of premium entertainment.  Just remember to stick to the facts when reporting on the current pace of the Netflix boom.


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  • Robbie Moraes

    Neither company is great.

  • Robbie Moraes

    You are all Wrong. The only place and network that will outlast all this is PBS. They have the best business model for the new era of TV, and besides we no longer live in a world where one company and just one method of putting programs out will be the only one available. There will be multi media platforms available for everyone to choose from. from which to watch what they want and when they want. There will be plenty of channels and TV stations still around. Both Commerical and Commercial Free.

    • http://ciangaffney.wordpress.com/ Cian Gaffney

      Robbie, why don’t you make a website? It seems as if your own opinions completely outshine everyone else’s. If only we could read the truth at your own website.

  • Connie Collins

    To be honest, I like Netflix more than HBO. I like independent movies and older movies, especially in the horror genre, a lot more than new blockbuster movies. I can find these on Netflix, while HBO shows the same huge blockbuster movies over and over..I don’t really care for most of these movies, and the ones that I do like that HBO shows are ones I already bought on dvd. The only thing I give a damn about on HBO is True Blood. And I am very pissed off that HBO wants to cancel it next year, as it was the reason why I got HBO. At least a lot of people feel the same way I do. https://www.facebook.com/dontcanceltrueblood?ref=stream&hc_location=stream

    • mwilson21

      ^ lol

      Look, I’m a True Blood fan (I mean, for the most part; I enjoy it for what it is, not what it isn’t), but I think it’s time for the show to go. It’s probably among the worst shows currently airing on HBO, and I think that American Gods would be a more than suitable replacement for True Blood in the summer spot. Maybe try watching some of their other great shows, or their original movies and documentaries, (just going to assume you’re not into sports) instead of just True Blood?

      Anyway, mostly agree with the article, except I think these broadcast and cable conglomerates are ultimately going to find ways to profit in any situation they may find themselves in. They are the content creators, as this article wisely pointed out, and nothing is stopping them from pulling all of their licensed content (when possible) and creating their own version of Netflix (as Warner Bros. has already done, IIRC).

      I think the real focus should be making a cable subscription worthwhile. I could never be without cable, as I’m a huge sports guy, but for a lot of people, they find ways to do without in favor of various streaming services. Let’s say that each channel (or groups of channels owned by the same parent company) all started offering services similar to HBO Go? You could watch their movies, original programming, etc. either live, or through their on-line streaming sites. This could also help networks with tallying more accurate viewing figures for their programming.

      Either way, as much as some people like to proclaim that television is dying, that isn’t actually the case. There are still over 100 million cable subscribers in the United States, and they’ve seen growth – not losses – over the last few quarters in those total numbers. The content providers aren’t going to simply allow themselves to be squeezed out, and in all reality, they know that that isn’t an option in the first place. Netflix wouldn’t survive very long if that $8.00 a month only got you their original series and public domain content, would it?

      • Jojocotto

        Great comment. True Blood needs to experience the true death and I would prefer a more segmented media future, pay for what you want rather than subsidizing what you don’t. The more I think about it, the less I can tolerate $120+ a month for the slim quantity that I want. ESPN paying $120 million per monday night football game is a perfect example of the runaway costs that result in a runaway cable bill. That bubble only seems to be getting bigger out of the pockets of the cable subscriber. Cable companies also have monopoly power over most apartment buildings. What a great business to be in.



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