Why Netflix doesn’t consider HBO’s streaming service a threat

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Netflix considers Internet TV services as complementary

In the previous part of this series, we discussed the increasing competitive threats to Netflix (NFLX). Recently, Time Warner (TWX) announced that it will offer consumers the option of subscribing to its HBO channel as a standalone, over-the-top online streaming service. This initiative aims at people who don’t subscribe to pay-TV services.

However, Netflix doesn’t consider this move a threat. During the conference call to announce Netflix’s 3Q14 earnings, management mentioned that both Netflix and HBO have completely different content, so HBO going online doesn’t threaten Netflix’s business.

CBS (CBS) followed Time Warner recently by allowing access to its programming through the Internet.

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It’s indeed true that HBO and CBS programming don’t overlap with Netflix original programming. If users can access shows like Game of Thrones and The Big Bang Theory online, they won’t disrupt Netflix, which is popular because of its original shows such as Orange is the New Black and House of Cards.

Plus, Netflix has always maintained that itself and other Internet TV players complement each other. Netflix claims these companies are participating in a transformation from linear video to Internet video. Netflix’s management had expressed similar thoughts for Amazon’s (AMZN) Prime video service. Netflix considers this service very complementary to Netflix‘s own service.

Media TV connected to internet

Video streaming market possesses huge potential

Time Warner’s actions of introducing a standalone HBO online streaming service clearly aim at leveraging the growth prospects that the video streaming market offers. According to a report from Leichtman Research Group and as the chart above shows, 49% of all U.S. households have at least one TV set connected to the Internet either through a video game system, Blu-ray player, smart TV, or set-top box such as Apple (AAPL) TV or Google (GOOG)(GOOGL) Chromecast. This penetration has actually doubled from just 24% in 2010.

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