HBO Gives Netflix An Ultimatum: $20 Per Month Or No HBO Content

According to an article in the current issue of The Hollywood Reporter, HBO continues to be a thorn in Netflix’s side as the online streaming and DVD-by-mail service continues to grow. Netflix has struck deals with a large number of networks and distributors including Epix, Starz, Fox, Time Warner, Relativity and NBC Universal, but HBO is standing firm on their stance that they’ve got “no intention of making [their] content available for streaming on Netflix.”

The fact that HBO sees Netflix as a competitor, rather than a partner, first arose back in August when Netflix announced a deal with Epix that could be worth close to $1 billion and added 1,000 new titles to Netflix’s streaming selection. Around the time of the deal, Netflix spokesperson Steve Swasey told Yahoo News that, “We now have streaming rights to 46 percent of the 2010 box office available to Watch Instantly compared with 45 percent for HBO.” Swasey added that, “We’d rather work with HBO just like we’re working with Starz and Epix and we’d like to collaborate with HBO.”

HBO, on the other hand, does not look to be willing to collaborate. According to the article in The Hollywood Reporter, “HBO considers Netflix more of a competitor than a potential partner.” HBO’s Senior VP of Corporate Affairs, Jeff Cusson, says, “HBO believes in content exclusivity, especially for high-value content. That’s our rationale for not selling streaming rights to a competing subscription service.” The article also quotes a high-placed executive at Time Warner as saying that “if Netflix expects to get a meaningful amount of HBO content, it would have to raise the price of its streaming-only service from $7.99 a month to $20 before the economics made sense.” However, Netflix disagrees saying, “[HBO makes] incredibly great content that is very expensive to produce. But we’re buyers and they’re sellers, so we’ll figure out a deal that makes sense. If we don’t then the service doesn’t have everything, and that’s OK too.”

Hollywood and the broadcasting and distribution industries have a love-hate relationship with Netflix. The “love camp” will tell you that Netflix is an additional distribution channel that offers yet another platform for revenue in an age in which paid television subscribers and traditional movie rentals are on the decline. And it’s true that Netflix has contributed substantially to the revenue of a number of networks and distributers (take the groundbreaking Epix deal, for instance).

The “hate camp”, on the other hand, will tell you that Netflix is one of the reasons that the movie rental business is failing and that many paid television subscribers are cancelling their subscriptions and tuning into online streaming services like Netflix and Hulu Plus instead. HBO falls into this camp. If they provide their content to Netflix then their subscribers will cancel service and start watching their shows on the cheaper, more convenient Netflix. The only way they would be able to prevent a loss in that case would be if Netflix could pay them a huge sum of money for their content that Netflix just might not be willing or able to pay.

Whether or not you fall into the love camp or the hate camp when it comes to Netflix, I think it’s obvious to everyone that online streaming of movies and television shows is on the rise and paying Netflix, Hulu Plus and similar service customers will be expecting content from HBO, among other networks and distributers. But will HBO be willing to give and will Netflix be willing to pay? Only time will tell.

What’s your take on the HBO-Netflix conflict and what do you think the outcome will be?

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