Can HBO compete with Netflix?

The premium cable channel locks up a 10-year deal with Universal Pictures.

By TheWeek.com Jan 9, 2013 2:03PM

Watching television copyright image100, CorbisThis week, HBO announced that it had inked an exclusive deal with Universal Pictures that would prevent Netflix (NFLX) from streaming Universal movies for another 10 years. 


That means Netflix's online subscribers won't be seeing a host of popular films -- including classics like "American Graffiti" and "Jaws," or newer movies like the Bourne franchise -- anytime soon.


HBO's coup is the latest sally in an increasingly competitive battle between online video-streaming sites, of which Netflix is the current leader.


In addition to HBO's online service HBO Go, Netflix is facing competition from Amazon's (AMZN) Prime Instant Video, Hulu, Verizon (VZ), and Apple (APPL).


But with the deal with Universal -- which is part of Comcast (CMCSA), as well as a menu of original shows like "Game of Thrones" and "Girls," HBO -- which is part of Time Warner (TWX) -- is emerging as "the closest thing Netflix has to a direct competitor," argues Paul Tassi at Forbes


The obvious count against HBO Go is that you have to fork over a bunch of cash for the mother channel before you can subscribe to the online service. Netflix's streaming service costs about $8 a month -- much cheaper than HBO. Indeed, investors brushed off the news of the HBO-Universal deal, sending Netflix shares to about $100, their highest level since early 2012. "Investors may be wising up to how Netflix is going to profitably offer streaming content that can compete with far more expensive cable and satellite subscriptions," says Antoine Gara at The Street.


In addition, Netflix signed a deal last month with Walt Disney Studios that would give it exclusive rights to stream Disney's new releases beginning in 2016. The deal includes new releases from Pixar and Marvel Studios.


However, with online services snatching up rights from different movie and television studios at a breathtaking pace, Netflix could soon become just one video-streaming site among many. "Netflix is trading as if it's the undisputed leader in the streaming video industry -- but all the recent deals by the likes of HBO and Amazon show just how fragmented the market is," warns Paul R. LaMonica at CNN.


Furthermore, HBO is launching a subscription model for HBO Go as a standalone service in Scandinavia, which could serve as a predecessor for a similar move in the U.S. With Universal's films in its pocket, as well as a much stronger slate of original shows, that version of HBO Go could prove to be a much stronger competitor against Netflix.


More from The Week

3Comments
Jan 9, 2013 5:53PM
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Hey HBO! There are a lot of us who want your service without all of the ancillary BS associated with a cable provider! Please do the Scandinavian thing in the US!
Jan 9, 2013 6:40PM
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You can't have HBO go without a HBO subscription from cable or sat which would run you around 80 to 100 dollars a month( with basic cable or Sat), But you can get Netflix for 8 bucks!
Jan 11, 2013 4:35AM
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I think, Netflix is the best choice for people according to the convenience and costing. Netflix is bit cheaper than HBO. I will always prefer Netflix.
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