Hastings downplays HBO competition; Sling TV, Sony Vue now the real threats

After telling investors for several years that his company's principal competition is HBO, Netflix is now downplaying the Home Box Office threat. The new threats, the company says, are emerging over-the-top services launched by pay-TV providers and tech companies.

"As we've said in the past, Netflix and HBO are not substitutes for one another given differing content," wrote CEO Reed Hastings and CFO David Wells in a letter to investors, sent Wednesday right before the SVOD service's Q1 earnings call. "We think both will continue to be successful in the marketplace, as illustrated by the fact that HBO has continued to grow globally and domestically as we have rapidly grown over the past 5 years."

Rather, it is full-fledged OTT pay-TV offerings that Netflix is concerned with: "We view 'Internet MVPD' offerings like the rumored Apple offering, Sony's Playstation Vue and Dish's Sling TV as more competitive to the current pay TV bundle than to Netflix which is lower cost, has exclusive and original content, and is not focused on live television," the letter reads.

The statement is notable for several reasons. One is that numerous times Hastings has identified HBO as the programming platform that most competes with Netflix.

The second is that, when he used to say that, HBO did not have an OTT service like HBO Now that was untethered from pay-TV subscriptions.

HBO Now's $14.99 price point is nearly double Netflix's $7.99 monthly bill, but HBO is offering a more-than-competitive mix of original, exclusive content, not to mention a movie slate that's less proliferate on rival SVOD services.

The biggest potential threat to Netflix (NASDAQ: NFLX): The possibility that HBO will secure content for its SVOD service programming from other providers, such as Showtime, as it does in the Nordic region.

For the quarter, Netflix racked up another 4.9 million subscribers, upping its global total to 62.3 million. You can read all about the actual earnings here at FierceOnlineVideo.

"We are increasingly spending on the promotion of our original content rather than emphasizing attributes of the Netflix brand and service that are now more familiar to consumers," the Hastings/Wells letter reads. "Early tests in international markets suggest this content focus is aiding member acquisition."

For more:
- read this Netflix letter to investors

Related links:
Netflix unapologetic on lower Q1 results as it pledges more spending on original content, international expansion
OTT's early impact: 6 rules for monetizing next-gen pay-TV business models
ABI Research to MVPDs: Come with OTT if you want to live
Karmazin: CBS and Time Warner Inc. need to merge

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