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HBO Hates Netflix (And You Should Too)

Stocks in this article: NFLX NWSA DIS CMCSA TWX

NEW YORK ( TheStreet) -- I first saw the story over at TechCrunch: Time Warner's (TWX) Home Box Office signed a deal with Universal Pictures, a division of Comcast (CMCSA), to keep the latter's films on the former's air through 2022.

Simply put, if you want access to roughly half of Hollywood's top releases -- after they leave the theater -- you'll need to subscribe to HBO through a cable or satellite company unless, someday, Time Warner offers HBO GO a la carte.

There's no question -- HBO and TWX execs were trading high-fives after this deal. While Netflix (NFLX) is more of a pest -- a veritable ankle-biter -- than a true threat, I know they enjoy knocking Reed Hastings around.

The comments that followed TechCrunch's story show a misunderstanding of the media business -- "old" and "new" -- as well as a sense of entitlement enabled, in part, by the illusion that Netflix operates from a position of strength.

The overarching reaction: Consumers lose. And, ultimately, because they're not "listening" to "what consumers want," HBO, Universal and others like them will lose. Wrong. That's where the misunderstanding and self-entitlement comes in.

Despite the cat calls, Time Warner, led by Jeff Bewkes, is not the dinosaur it's made out to be. They're just smart business people who control a considerable amount of premium content.

Let's run through reality from a consumer and investor standpoint.

  • You should hate Netflix because it has created a myth. By charging $8 a month for unlimited viewing and somehow signing an exclusive movie deal with Disney (DIS), they have lured the consumer into thinking content is cheap, that somehow we're entitled to everything we want to watch for a low price -- something closer to 10 bucks a month than the $50 to $100-plus most of us pay for cable or satellite.
  • Reality is as follows: Content is expensive because it costs a lot of money to make and, ultimately, the market -- to some extent, you -- sets the price. Advertisers pay big bucks to get on big-time shows and events, why shouldn't we do the same?

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