HBO Nicks Netflix By Refusing To Provide Discounted Discs

Was Time Warner CEO Jeff Bewkes being coy or sarcastic last month when he told a Wall Street gathering that “Netflix is our friend”? You might think so now that HBO has stopped providing discounted DVDs of its programs to the video rental company. It’s not a show-stopper for Netflix, which can continue to buy discs in the open market. The company says that it “will continue to provide HBO programs on DVD and Blu-ray to our members.” But HBO’s decision suggests that Netflix CEO Reed Hastings was on target last month when he told the same gathering where Bewkes spoke that HBO probably poses the biggest challenge to Netflix’s streaming service. “HBO and Netflix spend $1B-$2B a year on content,” he said. “At this point, none of those (other potential streaming services) have chosen to do that.”

Although Netflix mostly buys TV re-runs, it showed with its licensing of the upcoming series House Of Cards that it’s also prepared to compete on first run shows. Hastings said he’d increase spending on first runs “if it’s successful.” Yet he tried to downplay any rivalry between the companies. “If you’re tight on money you might cut HBO and use Netflix,” he said. ”But it’s not a direct competitor because many people use both.”