It has long been known that Netflix, Inc. (NASDAQ:NFLX) has a substantial amount of power over other TV outlets. As it rises higher in the industry, Time Warner Inc (NYSE:TWX) owned HBO has been struggling to keep up.
Netflix’s quick rise to success and its recent global expansion have earned the company universal recognition as well as given it more scale for the production of content that can attract the masses. At one point in time, HBO was enjoying a similar situation through the production of popular shows such as Game of Thrones.
Unfortunately for HBO, Netflix seems to have disrupted TV networks through its unique strategies. The content streaming company does not reveal ratings for its TV shows while HBO has to live by the rating standards instituted in the TV industry. As a result, the situation is more volatile for HBO because poor ratings could lead to the death of its shows.
Another limitation that the studio faces is the limited funds that are available for investing in new shows. Netflix, on the other hand, has been known to invest billions in the making of new TV shows and films. HBO recently invested more than $100 million in a new TV show called Vinyl, and the studio is now walking a thin line due to fears that the show might not be as successful as hoped.
The company has lately been under more pressure because it has not released any show that has been as successful as Game of Thrones that made its debut in 2011. To sum up HBO’s financial situation, the studio gets roughly 30% of its operating profit from Time Warner Inc. The latter’s performance has been tanking due to cord cutting, thus causing more pressure on HBO.
Netflix has a massive subscriber base, and one would think that streaming content would provide a solution for HBO. Unfortunately, this is not the case because the studio launched a streaming platform called HBO Now in 2014 and it only has 800,000 subscribers, a far cry from the expected numbers. One of the major problems that HBO faces is that it is not growing, unlike Netflix.