HBO to Take On Netflix with New Streaming Service in 2015

HBO announced yesterday that it plans to launch a standalone Internet streaming service in the U.S. next year that would not require a traditional TV subscription. The move is part of the cable network’s strategy to reach out to cord cutters, and underscores its growing rivalry with Netflix. The two companies are battling for a new generation of viewers who prefer watching their TV shows and movies via Amazon, Hulu, Netflix, and YouTube rather than subscribing to cable or satellite television.

hbo2“Richard Plepler, chief executive of HBO, pointed to 10 million homes in the United States with Web service but no traditional cable or satellite television subscriptions — half of which, he said, subscribed to a streaming service,” reports The New York Times.

“That is a large and growing opportunity that should no longer be left untapped. It is time to remove all barriers to those who want HBO,” Plepler said. “All in, there are 80 million homes that do not have HBO and we will use all means at our disposal to go after them.”

Netflix currently has 50.7 million international subscribers, with 36.3 million subscribers in the U.S. While HBO has less U.S. subscribers (about 30 million), it reportedly earns more profits due to lower costs.

Netflix CEO Reed Hastings explained that his company for several years has identified HBO as its primary long-term competitor.

“The tech companies of the world have turned it on faster and better,” said Jeff Bewkes, chief exec of HBO’s parent Time Warner. “We have also had to say today, we’re also going to do it.”

“Several details for HBO’s new service remain to be worked out, including what content is available, the subscription fee and the distribution models,” notes NYT. “HBO now makes its programming available over the Web to paying TV subscribers through its HBO Go service. Executives said that the content available through its new online-only offering would be similar. HBO is unlikely to undercut the $15 monthly rate viewers pay to cable or satellite companies for a subscription to the service, executives said.”

Variety is referring to the streaming service as “HBO Go-It-Alone,” and offers possible scenarios that question the following presumptions:

  • That HBO Go-It-Alone will simply be the same offering as what current HBO subscribers get.
  • That whatever HBO Go-It-Alone is represents a direct competitive response to Netflix.

  • That HBO Go-It-Alone will represent some kind of snub to HBO’s pay TV distribution partners.

Also yesterday, Netflix announced it has licensed NBC’s hit series “Friends,” which is significant considering it comes from Warner Bros., a sibling to HBO under Time Warner.

“HBO could have conceivably created a ‘Netflix killer’ of a product that not only encompassed its own massive library but tapped the even broader Warner Bros. library as well – an alternative that HBO execs have alluded to in the past. But the ‘Friends’ deal would seem to indicate that this isn’t the route HBO has chosen to take,” Variety reports.

“Whatever HBO Go-It-Alone is, there has to be a way of slicing off a meaningful sliver of the existing offering in a way that doesn’t trigger cannibalization.”