As new competitor emerges, Netflix CEO says HBO Go is the true threat
Dec 07, 2011 (San Jose Mercury News - McClatchy-Tribune Information Services via COMTEX) --
Netflix (NFLX) could face more competition in the near future, but CEO Reed Hastings believes its biggest threat in the streaming-video market is a traditional entertainment company: HBO.
Verizon Communications plans to introduce a streaming-video service to rival Netflix, Reuters reported Tuesday. Not long after the report surfaced, Hastings took the stage at a UBS conference in New York and admitted there is an "arms race" for Web-based TV viewing.
However, it's not Verizon, Amazon, Dish Network or any other new-school competitor that causes him the most concern, since he said they will have to spend $1 billion or more on content to rival his company. Instead, Hastings pointed out HBO's online component, HBO Go, which recently introduced an iPad app and offers streaming access to all the premium cable channel's offerings to subscribers.
"HBO is becoming more Netflix-like and we're becoming more HBO-like," Hastings said, according to the Los Angeles Times.
"They are not competing directly with us, but they can," he added.
According to the Reuters report, Verizon Communications -- which provides telephone, broadband Internet and cable television services and owns part of Verizon Wireless, the cellphone carrier -- plans to roll out the service in 2012 for markets not currently served
by the company's FiOS cable offering, which includes the Bay Area.
Verizon's plan includes a limited amount of content, Reuters reported, possibly focusing solely on movies or children's programming while pricing its offering similarly to Netflix.
Los Gatos-based Netflix, which has more than 20 million subscribers with its streaming-video and DVD-by-mail options, faces competition on several fronts already. Amazon has signed deals with content providers at a rapid clip for a streaming service it bundles with its Amazon Prime service, and Dish Network offers a streaming service with its television packages along with DVDs by mail through its purchase of Blockbuster.
Netflix lost 800,000 subscribers in the third quarter after suddenly increasing rates by up to 60 percent for customers who wanted streaming service as well as DVDs by mail.
Netflix, which has been losing money due to the dropped subscriptions and the costs of international expansion and new content deals, sees no quick return to profitability, Hastings said. The company's stock dropped 2.8 percent to $68.14 Tuesday, far off last summer's highs of more than $300 a share.
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