Will HBO Now Become AT&T’s Netflix Killer?

Six years ago, Jeff Bewkes derided Netflix’s threat as a competitor — facetiously comparing the streaming company’s ambitions to the likelihood that the Albanian army would take over the world. Now that his company is set to get sucked into AT&T’s maw, the Time Warner CEO is talking a different game: one that sounds a lot like Netflix’s data-driven approach to acquiring and developing content.

With AT&T’s heft, HBO Now — already a key rival to Netflix — stands to become a more robust offering in the U.S., potentially bundled with the telco’s wireless and broadband subscribers.

And the telco could provide resources to accelerate the global rollout of HBO’s over-the-top services to take on Netflix worldwide, as Amazon also looks primed to take its video subscriptions to more countries.

There are two critical differences between Netflix and HBO when it comes to streaming. First, HBO owns global rights to all its original series, while Netflix has only just started landing worldwide rights to shows it licenses, and owns only a few series outright, like “Stranger Things.” Second, HBO’s preference is to go to market with strategic partners, as it has done with pay-TV distributors for its entire existence. A year ago, HBO chief Richard Plepler complained at an industry confab that Comcast and other large internet providers were being “myopic” by not bundling HBO Now with their broadband offerings. Since then, HBO hasn’t inked any significant deals with U.S. internet service providers. AT&T would change that in an instant: It has more than 14 million broadband customers and 54 million consumer wireless subs.

Besides access to preferred pipes and placement on millions of smartphones, HBO and other Time Warner companies, as part of AT&T, would get access to something Netflix has touted as a competitive advantage for years: Big Data. One of the benefits of the AT&T/Time Warner merger called out by execs of both companies is the ability to mine the vast amount of usage data from the telco’s mobile, TV, and broadband users to make programming decisions.

“There’s a huge opportunity to utilize consumer insights to inform content creation that allows us to continue to create not just the biggest hits, but also content and programming that really engages with passionate niches in the audience,” Bewkes said on a call with analysts Oct. 24.

Currently, HBO’s TV networks are available in more than 50 countries, and reach more than 35 million subscribers. But the company, and AT&T, see an opportunity to bring the brand to larger internet audiences everywhere.

Whereas Netflix is available in 190 countries, HBO’s OTT offerings are in just a handful. The HBO Nordic streaming service, launched in 2012, is seen as a negligible success in Scandinavia. HBO standalone streaming services are also available in Colombia and Mexico, with launches set by year’s end in Brazil, Argentina, and Spain.

HBO representatives deferred to statements made by its parent company and AT&T regarding future plans under the telco’s wing.

Regulators are likely to place restrictions on how a merged AT&T and Time Warner would operate. For example, they may mandate that services like HBO be made available on a nondiscriminatory basis to all distributors. But the coupling of powerful content and distribution under one roof promises to be a boon for HBO’s OTT future.

Netflix may be worried that HBO will become a more formidable competitor with the backing of the U.S.’ biggest telecom company.

“How it impacts anybody will be highly dependent on how it emerges,” Netflix content chief Ted Sarandos said at USC’s Entertainment Law and Business conference, before the AT&T/Time Warner pact was officially announced. “Those are pretty powerful assets. I’m sure it will come under a great deal of scrutiny.”

Cynthia Littleton and Debra Birnbaum contributed to this report.

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