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How Does HBO Now Compete with Netflix?

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HBO Now

HBO Now, the OTT (over-the-top service) from Time Warner (TWX), continues to grow in importance. The parent company expects the revenue contribution from HBO Now to the company’s total subscription revenues to increase in fiscal 2016. Time Warner stated earlier this year that HBO Now was close to hitting the 1 million subscribers mark. At the end of 2015, HBO Now had 800,000 subscribers. HBO Now is also focusing on original programming by ramping up its original programming to 600 hours each year.

Netflix referred to HBO Now on its fiscal 1Q16 earnings call. It stated that it believed HBO Now must already have surpassed the 800,000 subscriber mark, considering that the over-the-top service is available on different platforms—including Microsoft’s (MSFT) Xbox One and Apple TV (AAPL).

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HBO Now focuses on original programming

In April, Time Warner referred to its content library at a Deutsche Bank (DB) investor conference. It stated that HBO has a lower content budget at $2 billion per year. Around $1 billion of that total is for original programming. The company also stated that HBO is targeting around 600 hours of original programming this year.

According to a BloombergBusiness report citing data from MoffettNathanson, and as the above chart shows, while Netflix (NFLX) is expected to spend around $5 billion on original programming, Time Warner is expected to spend $4.6 billion on original programming. In contrast, Discovery Communications (DISCA) and The Walt Disney Company (DIS) are expected to spend less on original programming—$2 billion and $2.8 billion, respectively.

Netflix makes up 0.24% of the SPDR S&P 500 (SPY) ETF.

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