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Cable Technology Feature Article

October 21, 2013

Netflix Soon to Be Bigger than HBO in The United States

By Steve Anderson, Contributing TMCnet Writer

For an increasing number of users out there, Netflix is taking the place of regular cable and a host of other options. Turning to Netflix, for discs, for streaming or for both, is becoming a greater part of the home entertainment landscape than ever, and the numbers are showing just how far Netflix is progressing when it comes to bringing video to customers.

New reports show that Netflix almost certainly hit 30 million subscribers as of September 30, and that just edges out HBO, which counts 28.7 million subscribers to its credit. Netflix has managed to bring in a host of new subscribers not only with the massive array of options presented by the older content that appears on the service—not to mention some of the newer stuff that shows up—but also in terms of the original content that only shows up on Netflix, at least in the early going, including “House of Cards,” “Orange (News - Alert) is the New Black,” and the latest season of “Arrested Development.”

Netflix is also looking to bring its brand of new and unusual programs to cable services, and cable providers are starting to prove receptive to Netflix's offering. The monthly subscription fees are said to be an asset, and some, like Janney Capital Markets analyst Tony Wible, suggest that Netflix is likely to be “...more valuable than other networks,” noting further that the monthly price Netflix asks “...makes it very difficult for others to be in the business.”

image via fansided.com

There are some indications that changes may be ahead for Netflix, however, with some suggesting that Netflix should proceed to a tiered pricing model, in that those who stream a lot with Netflix should pay more as the value of said customer falls the more that customer streams. Needham & Co. analyst Laura Martin said, “The more hours a household watches Netflix, the faster Netflix's value proposition falls, and the lower the probability of renewal the next month.”

I assert that Martin is off base here, as she seems to ignore one of the greatest assets of Netflix: easy access. Netflix is not a zero-sum game, in which users watch what users want, then cancel the account and never come back. Netflix allows users to essentially program a slate of reruns to suit individual tastes. Want to watch “My Name Is Earl” and “Raising Hope” back to back from 7:00 to 8:00? It's possible. A three-hour marathon of “My Little Pony: Friendship is Magic?” Done and done. And that's before the issue of the movies gets involved.

A household isn't likely to cut its membership because said household has “seen everything.” Said household can then go back to the beginning and start again as it likes. Since Netflix continues to add content—generally on Tuesdays, the traditional new release day in the home video realm—the household that shuts down its membership loses access to the new content, and at $8 a month, who would do that? What may really hurt Netflix, though, is if that new content pipeline ever starts to close up. With Netflix showing up in more places, and on more devices, studios may not be eager to lose access to that audience.

Only time will tell, of course, just where Netflix goes from here. While there are significant opportunities afoot, there's also substantial risk. If Netflix can keep on the content providers' collective good side, that's likely to help in a big way, but keeping that relationship sound may be tougher than expected.

Edited by Ryan Sartor

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