Here's How HBO Expects to Knock Off Netflix

By Daniel B.

BeforeNetflix became the go-to source for high quality original television shows,Time Warner's HBO was the undisputed leader in that category.

The pay cable station started with lower-brow shows in the 1980s and 1990s likeFirst & Ten,Dream On, andTales From the Crypt before staking out a reputation for quality delivering groundbreaking programs includingThe Larry Sanders Show,The Sopranos, andSix Feet Under. For many years the company used the slogan, "It's not just TV, It's HBO," and that meant something.

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"HBO effectively created a new value proposition that that television was something worth paying for," wrote In Lee in theHandbook of Research on Telecommunications Planning and Management for Business.

The Time Warner property built a reputation for delivering event television and shows that met a certain standard. Even its programs which failed to reach a mass audience likeEnlightenmentorThe Newsroomwere noble experiments, and pretty much any drama or comedy bearing its banner got at least a chance from viewers.

Recently however Netflix has taken over HBO's former reputation. Yes, the cable company still has appointment programs in Game of Thronesand to a lesser extentLast Week Tonightbut it'scededsome of its former luster to mostly the streaming leader, but also cable channels like AMC (Mad Men, The Walking Dead).

Now that HBO is no longer just a premium cable channel, it's also a stand-alone app directly competing with Netflix, Time Warner has a plan to reclaim its place at the top of the content heap.

What is HBO doing?For most of its existence HBO's success was driven by its ability to constantly have at least one show that was so popular people simply could not skip it. Whether it wasSex in the CityorTrue Blood, those hit shows made the rest of the channel's package of movies, sports, and the occasional talk show a good deal.

What HBO did not have was regular appointment content on a wide scale. Yes, it has Bill Maher, and it used to have Chris Rock, hosting once-a-week shows, but it did not have a stable of difference makers under contract creating content.

That has changed rapidly in recent months with the cable channel/pay service locking up a deal with Vice for a daily news program, signing sports/pop culture personality Bill Simmons for a daily talk show, podcasts, and other content, and most importantly landing Jon Stewart. The former Daily Showhost won't be hosting a show, at least at first, instead he'll be delivering shorter content for the company's digital platforms.

Why does this matter?Vice, Simmons, and Stewart all have audiences which will likely follow them to HBO. Signing all three for varying, but significant roles gives the cable/streaming service more reasons for people to subscribe beyond its big dramas and comedies. That's very important given that creating hit shows has become harder for the network.

Vice is a bit of a wild card, but it has proven popular with younger viewers -- the people who would cut the cord and opt for HBO and/or Netflix. Stewart and Simmons however are proven commodities with dedicated audiences. Simmons has already shown that with his post-ESPN podcast jumping to the top of the charts straight out of the gate and there's no reason to believe Stewart's fans won't follow.

Aside from Howard Stern (who is about to be a free agent) it's hard to see who HBO could have signed that would have been more likely to bring viewers/subscribers with them.

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Netflix is not standing patThe streaming leader actually beat Netflix to the punch by signing Chelsea Handler to host a talk show. Handler has had numerous hit books and her E! late night show carved out an audience that was not that much smaller than Stewarts at its peak. The outspoken personality may not quite have Simmons or Stewart's following, but she has proven popular with women and signing her will likely pay off for Netflix.

This round goes to Time Warner's HBOThe biggest challenge for HBO as it attempts to make its Now service -- which does not require a cable subscription -- a viable Netflix competitor is that it costs more. The difference between $14.99 and $9.99 a month is fairly significant if consumers see both services as an equal value.

Currently, HBO has better originals archives, offers sports programming, and has more topical programming. Netflix has more movies and TV shows in a broad sense as well as more must-see originals.

Adding Vice, Simmons, and Stewart however may tip the overall balance to HBO. Yes, Netflix will still have a number of programs which are watercooler-worthy, but what stops users from joining for a month or two a year and binge watching? With its new lineups of name-brand stars, HBO has given people more reason to tune in on a daily basis -- especially the Stewart deal -- and that might give it an edge over Netflix for now.

The article Here's How HBO Expects to Knock Off Netflix originally appeared on

Daniel Kline has no position in any stocks mentioned. He has both HBO and Netflix, but forgets to use the HBO app. The Motley Fool owns shares of and recommends Netflix. The Motley Fool recommends Time Warner. 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.

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