Netflix (Nasdaq: NFLX) said it believes HBO will be its biggest long-term competitor among TV networks. In an update to shareholders on the company's long-term view, Netflix described a TV future in which all TVs will have an Internet connection and ability to carry apps, online video beats linear TV to supporting new higher-resolution standards and competition from all quarters is intensified.
"So far, the individual network apps (HBO GO, etc) are ahead of the MVPD apps because consumers relate to the network brands, and the apps are tailored to the specific content type," the company said. "The competition for Internet viewing, however, is just beginning."
HBO has bid against Netflix on many original projects and recently won long-term exclusive domestic movie rights from Universal and Fox, Netflix said, adding, "They have a global reach and strengthening technology capacity."
After HBO, Netflix ranked Amazon (Nasdaq: AMZN), Hulu, Now TV and several broadcast and cable networks as its main competition. "Amazon in particular is spending heavily and commissioning its own original programming, presumably because they see the same exciting big picture for Internet TV that we do," Netflix said.
Unlike with satellite radio or traditional pay-TV operators, the success of one service won't necessarily come at the expense of another, Netflix said. "Our competition is like that between Showtime and HBO," the company added. "Many consumers will subscribe to multiple services if they each have unique compelling content."
Still, Netflix is confident of its profit prospects. "We believe that once a subscription video service has achieved profitability and scale in a market (20% to 30% of households) it is very likely to be able to sustain that profit stream for many decades," it said. "It will likely take something 'beyond streaming' for a scale player in subscription streaming like Netflix to see its profits choked off."
And that "beyond streaming" product--whatever it may be--is still a long way off, said Netflix.
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