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HBO Hates Netflix (And You Should Too)

NEW YORK ( TheStreet) -- I first saw the story over at TechCrunch: Time Warner's (TWX - Get Report) Home Box Office signed a deal with Universal Pictures, a division of Comcast (CMCSA - Get Report), 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 - Get Report) 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 - Get Report), 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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