As many of you know Netflix started off as a DVD rental service through the mail, but then branched into online streaming through Microsoft's Xbox 360, and through the internet on computers. Netflix single handedly put DVD rental companies such as Blockbuster out of business. My topic of discussion is whether premium streaming movie companies such as HBO and Showtimes are next to be eliminated by Netflix. Netflix may be putting HBO, and their parent company Time Warner out of business due to new streaming movie contracts between Netflix and a new premium channel Epix pay-TV. HBO and other premium movie rental channels work by going to the On Demand function and choosing which movie you want to watch, and you pay monthly for this service. Due to these new contracts, Netflix may be offering a cheaper, and larger selection of movies that are easy to access without sending DVDs in the mail like it used to do.
When Time Warner CEO Jeff Bewkes was asked about Netflix he stated, "So far it has been more of a complementary service to HBO than a competitor." This is because Netflix has been renting out their movies as DVDs online, as regular DVD rentals have slipped. But this could change as Netflix increases its movie rental contracts. Epix pay-TV channel has licensing to Viacom's Paramount Pictures, MGM, and Lionsgate. Here is an article that discussed the deal while it was under negotiations. http://venturebeat.com/2010/08/09/netflix-in-talks-with-pay-tv-network-epix-to-stream-films-from-paramount-mgm-lionsgate-for-1b/. The article states that the potential bid was for $1Billion, but Netflix and Epix came to a $900 Million agreement. This contract increases Netflix available movies rentals by 3,000. This increase in movies will cause higher competition between Netflix and HBO.
On the other hand, as Netflix customer base has risen to 15 million users, HBO and sister company Cinemax sits at a cool 41 million subscribers in 2009. This is a huge amount of customer base to cover if Netflix wants to dominate the movie streaming market. Besides HBO having the majority of the market share, Netflix still has a few obstacles despite its increase in movies. Most people choose to watch movies in their family room, not on their computer, and not everyone owns an Xbox 360. This eliminates a lot of customer base who want to watch movies quickly on their TV. That is why customers may chose to stay with the On Demand options of HBO and Cinemax. A problem for HBO in the future might be that Netflix comes out with a streaming device for TVs. Right now there are a few options such as Apples new TV box, but not everyone wants to pay for an expensive device to just watch movies.
HBO also has an upper hand on premium TV shows. HBO refuses to license any of its original TV shows to Netflix. HBO holds the rights to movies from studios such as Twentieth Century Fox and Universal Pictures. Netflix continues to try and negotiate a contract with HBO to stream their content, but HBO refuses.
I believe that Netflix will be a top competitor for Time Warner's HBO and Cinemax in the future if it continues to create contracts with more movie studios and develops a cheap and easy way to stream movies on TVs. Even as it is a top competitor for HBO, it is my opinion that HBO will remain at the top due to its current holding of the market share, it's easy to access library of movies that includes On Demand on TVs and easy streaming online. HBO has access to top movies and TV shows unlike Netflix and will remain the favorite for DVD viewing.
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