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Netflix Is Teaching Old HBO Some New Tricks

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As Netflix (Nasdaq: NFLX  ) was planting the flag on digital streaming's virgin topsoil, Time Warner's (NYSE: TWX  ) HBO was taking notes.

The premium cable movie channel will let subscribers stream its content on demand through Microsoft's (Nasdaq: MSFT  ) Xbox 360 in April, coinciding with the season premiere of Game of Thrones.

HBO Go has been around for more than two years, giving the channel's audience streaming access to the network's original programming, select movies, and other content. Despite a healthy representation of new releases that can't be found on other digital smorgasbords, it's HBO's signature shows that consumers are streaming. Co-President Eric Kessler claims that 75% of all HBO Go viewing consists of the channel's proprietary content.

HBO Go was originally designed for PC-based streaming -- just like Netflix -- before moving on to tablets and smartphones for truly mobile viewing. Now HBO will make its video game console debut on the Xbox -- just as Netflix did in 2008.

Console streaming is attractive for plenty of reasons. For starters, there are tens of millions of Web-tethered devices in this country for each of the three major consoles. In other words, the audience is already huge. Since consoles are typically connected to TVs, we're talking about the natural appliance to kick back and stream old episodes of Entourage and Curb Your Enthusiasm.

One can argue that HBO subscribers have already nailed the final mile through cable boxes, but we're talking about streaming on demand here. It's the way that today's breed of couch potatoes expect to consume programming.

Is this a threat to Netflix and Hulu Plus? Yes and no. HBO's content is undeniably compelling, but it's also brutally expensive.

HBO Go is provided to the channel's subscribers at no additional cost, but a subscription to HBO involves paying far more than Netflix's monthly rate on top of a required cable or satellite television subscription. Until HBO is offered as a stand-alone offering -- and it probably never will be, given its relationship with cable providers -- it will limit its reach to those willing to shell out at least $80 to $100 a month for television. Netflix, Hulu Plus, and's (Nasdaq: AMZN  ) even cheaper Prime streaming will continue to carve out mainstream audiences.

HBO is an old dog learning new tricks, but it's not going to be much of a show until it gives up its pedigree papers and reaches out to the masses.

Stream on
Motley Fool co-founder David Gardner has been a fan of Netflix as a disruptor for nearly a decade, but there's a new Rule-Breaking multibagger that's getting him excited these days. Learn more in a free report that you can check out right now

The Motley Fool owns shares of Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft and Netflix. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz has been a Netflix subscriber and shareholder since 2002. He does not own shares in any of the other stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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  • Report this Comment On February 28, 2012, at 4:16 PM, ed697 wrote:

    HBO needs to reach out to the masses? It has 80 million subscribers. I think the masses have already bought their big screen HD TV's and are happily watching HBO shows and movies already. Netflix needs to compete just like any other premium channel for entertainment dollars.

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