Netflix Makes A Big Bet On Original Content And Wall Street Already Starts To Sour On HBO

Netflix is serious about giving the cable industry a run for its money.

The company is indeed making a big bet on original programming, committing to a minimum of 26 episodes of a show called “House of Cards,” starring Kevin Spacey, and executive produced by David Fincher. The shows will be exclusively streamed on Netflix before they’re available anywhere else.


Because if it works, Netflix content boss Ted Sarandos tells All Things D’s Peter Kafka, “it won’t be any more expensive than licensing a popular show off of a network.” That’s a big if there — if it works. But you can’t win if you don’t play, so Netflix is trying this out.

There’s also another benefit here. Not only is Netflix potentially going to be the only place to watch a hit show, but it’s now going to be more competitive with other pay TV networks like HBO and Showtime, from which Netflix wants to be able to licence more shows.

If “those shows are not going to be made widely available in decent windows, then my other alternative would be to compete with those guys for those shows,” Sarandos says.

That’s already enough to get Wall Street thinking about HBO’s future and how Netflix could disrupt it.

Because HBO relies on cable affiliates like Comcast and Time Warner Cable for 85% of its revenue, it’s less likely to try major digital innovations that could help it compete with the likes of Netflix, Barclays analyst Anthony DiClemente says in a note today.

This competition could pinch HBO’s subscriber growth — enough that DiClemente just trimmed his Time Warner 2011 EPS estimate to $2.73 from $2.75 and introduced a below-consensus 2012 EPS estimate of $3.05. He also reduced his Time Warner price target to $36 from $38.

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