Netflix, Inc. (NASDAQ:NFLX) CEO Reed Hastings said last year that his company aims to become HBO. The two companies don’t compete head-to-head. Netflix is an Internet TV service company, while HBO is a linear channel, which is an add-on to cable TV packages. But the emergence of Netflix as a subscription TV service, and its heavy investments in original programming have drawn comparisons. Industry experts are closely watching if consumers will ditch traditional pay-TV as they move to Internet TV.
Netflix outpaces HBO in revenue growth
Recently, Netflix, Inc. (NASDAQ:NFLX)’s chief content officer Ted Sarandos said that his company wants to, and can become HBO faster than HBO could become Netflix. To add fuel to the comparison,, Time Warner Inc (NYSE:TWX) recently revealed HBO’s quarterly results separately last week. It showed that the premium cable channel is earning much bigger profits than Netflix. However, HBO’s revenue grew at a much slower pace of 4% in 2013, compared to 21% of Netflix.
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For the full year 2013, HBO earned a net profit of $1.8 billion on revenues of $4.9 billion. In contrast, Netflix, Inc. (NASDAQ:NFLX)’s 2013 revenues jumped 21% to $4.37 billion. But its profits still lag far behind HBO at just $228 million. Profits were lower mainly due to the company’s heavy investments in new programming. Analysts have argued that the company’s focus on original content will help it win the long-term battle. Netflix’s original programs like House of Cards and Orange is the New Black have garnered praise. Experts also say that the company is likely to start producing blockbuster movies in the near future.
Netflix and HBO complement each other?
Despite the so-called rivalry, Time Warner Inc (NYSE:TWX) CEO Jeffrey Bewkes said the two services are “complementary.” During the fourth quarter earnings conference call, Netflix, Inc. (NASDAQ:NFLX) CEO Reed Hastings said that Netflix and HBO are unlikely to be affected by mobile trends because they both are “large screen-centric.”
Netflix, Inc. (NASDAQ:NFLX) shares went up 0.36% to $431.99 in pre-market trading Tuesday.