Coming in April, HBO will launch HBO Now, its very own Netflix (NASDAQ:NFLX) competitor. For $14.99 per month, HBO Now subscribers will be able to access all of HBO's content over the Internet -- no expensive cable package required.
Cord-cutters have long dreamed of such a service, and Time Warner (NYSE:TWX) -- HBO's parent company -- is finally delivering. But HBO Now is almost twice as expensive as Netflix, whose basic package costs just $7.99.
That might discourage some, but for the time being, HBO is justified in charging higher prices. Let's check out why.
Quality over quantity
HBO doesn't have as much content as Netflix, but it does have better quality.
In 2014, HBO's original programming pulled in 99 Emmy nominations -- more than tripling Netflix's 31 nominations. In total, HBO won 15 awards -- the most for any network -- compared to just seven for Netflix.
Unfortunately, Netflix does not disclose ratings data, making a popularity comparison difficult. Still, while Netflix's House of Cards and Orange is the New Black series have attracted a great deal of attention, neither seem to have generated buzz on the level of HBO's Game of Thrones or True Detective. Netflix has launched other exclusive series -- BoJack Horseman and Marco Polo -- but they have drawn even less attention, and virtually no critical praise.
When it comes to licensed content, Netflix has an advantage over HBO, with older seasons of many hit series, including Friends, Mad Men, The Walking Dead, and Breaking Bad. But few of these series are exclusive to Netflix; many can be found on Amazon Prime and Hulu, and most can be purchased individually (both digitally and on disc).
The same is true for film. As I write this, popular streaming movies on Netflix include Black Sheep, Patch Adams, and Jerry Maguire -- excellent flicks, but all fairly old. HBO, in contrast, boasts many films from 2014 -- 300: Rise of an Empire, Edge of Tomorrow, and The Grand Budapest Hotel, among others.
HBO is giving consumers fewer options but more value
And while HBO is charging a higher rate, it's actually giving its subscribers more for their money. An HBO Now subscription includes access to HD content -- something Netflix subscribers have to pay an extra $1 a month for. It also allows for three concurrent streams (meaning three different people can watch three different shows from the same account at the same time). Both Netflix's base tier and its standard HD package offer only two. It's possible to upgrade to 4, but that increases the cost of a Netflix subscription to $12.
But Netflix is adding new series quickly
In time, Netflix could close the quality gap with HBO. The streaming giant has dozens of shows in the pipeline, such as Marvel's Daredevil and the Wachowski siblings' Sense8. And while the shows may not be as high quality from a storyline perspective, they could be more visually appealing -- Netflix is slowly offering more of its catalog in 4K, a jump HBO has yet to take.
But for the time being, Time Warner appears to be justified in charging a higher price for its service. Until Netflix can offer a series comparable in stature to Game of Thrones, or win as many Emmys, it will have to compete on price.
Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Netflix. The Motley Fool owns shares of Amazon.com and Netflix. 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.