HBO is going through a transition period, and many of its competitors are afraid that HBO will get ahead of them in the near future. Companies like Netflix are also scared that the revamped HBO will be tough to fight against.
The lower growth of Netflix subscribers in the United States has created a shock in the digital media industry. Netflix stock has lost a quarter of its value.
The blitzes hurt a lot. The powerful pay channel HBO, one of Time Warner Group’s most profitable affiliates, has announced its intention to compete frontally with Netflix. HBO after being acquired by AT&T has been gaining a lot of ground in the recent times. A lot of new original content is now available on HBO, and the company’s two most amazing apps, HBO Now and HBO Go are getting more subscribers than they have ever got.
This declaration of war fell just before the publication of disappointing quarterly results for Netflix. As a result, the combination of the two news has frightened the market. On Thursday, the title Netflix gave up 23% of its value in one sitting. A big hit of tobacco for investors’ favorite media value. HBO, the American model of Canal +, producer of American series among the best-known as Game of Thrones, The Soprano or Boardwalk Empire, has decided to expand its empire that already has 31 million customers in the United States. HBO now wants to go international with its unlimited Internet service HBO Go, a direct rival of Netflix. It will be Game of Thrones versus House of Cards.
Reed Hastings, the founder, and CEO of Netflix, immediately responded in his letter to shareholders. “Since 2011, we have started to say that HBO could be our biggest competitor in the long term, especially in content.”
Netflix has already successfully faced a competitor of weight: Amazon. But the latter had no legitimacy in the contents. Gold HBO is the king of content. Reed Hastings believes the competition will be tough and makes both competitors even better. He finally hopes that the exclusive programs of both services will be so good that people will take two subscriptions to not miss anything.
In the meantime, Netflix has shown that subscribers are very sensitive to the price issue. The recent $ 1 increase in subscriptions stalled growth in the United States. In the quarter, Netflix gained only 980,000 new customers against 1.33 million expected. The video platform has caught up with winning 2.04 million international customers. A true growth relay that he intends to pursue. In September, the group opened the French, German, Swiss and Belgian markets. But every new country on which Netflix is planting its flag requires heavy investment.
Currently, the US market ensures the profitability of the group. In his home country, Netflix realizes a margin of 29% while he loses money abroad.
Forecasts for the current quarter also shed a chill. Netflix plans to win 4 million customers, including only 1.85 million in the United States. Above all, its earnings per share should be halved, compared to analysts’ expectations.
In the long term, Reed Hastings is still targeting 60 to 90 million subscribers and boosting the profitability of newly conquered foreign countries. HBO is going to get a lot better in the days to come, so Netflix has to work on improving its platform if it wants to stay ahead of its competitors.