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TheStreet Open House

Netflix Can't Hold HBO's Jockstrap

NEW YORK ( TheStreet) -- As a nation, we could use some meaningless levity right now. I know I require a laugh. So that's what I aim to provide -- a media- and stock market-related chuckle -- amidst what we're all feeling now . . . unified sadness as we attempt to make sense of the senseless.

For a giggle, just read this headline: Netflix Catching Up to HBO Quality. For an outburst of laughter, see the article where TheStreet's Andrea Tse summarizes BTIG Media analyst Richard Greenfield's bull case for Netflix (NFLX).

While I can't necessarily argue with his $250 price target on the stock, I just wish he would acknowledge the irrationality -- some of which he espouses -- that historically takes NFLX higher.


Here's the crux of Greenfield's argument as relayed by Tse with clarifying interjections:

(Netflix) is moving closer . . . toward possessing the "intangible quality of the brand" that Time Warner's (TWX) HBO has, and perhaps may even have a competitive edge in this regard, by offering a far more attractive price to subscribers and a wide array of kids programming that HBO does not have.

. . . intangible quality of the brand . . . That's lofty, Rich.

Has HBO ever hallmarked itself around "attractive price" and "a wide array of kids programming?" Fraggle Rock was pretty good, but never a cornerstone of the franchise. HBO doesn't compete with Netflix in this regard so, out of the gate, Greenfield presents a flawed comparison.

Reed Hastings floats this absurd notion that Netflix and HBO are somehow similar or on equal playing fields in terms of "quality" and uncritical Wall Street analysts such as Greenfield concoct errant adaptations.

Greenfield also lauds Netflix's critically acclaimed, but underwatched serial dramas such as "Mad Men" and "Breaking Bad" and its launch of original programming.


So, all of a sudden, we're assigning ownership of AMC Networks (AMCX) content to Netflix?

"They are trying to reach a point where consumers know that there will always be something new and interesting coming that requires a Netflix subscription, in addition to top-tier syndicated programming and a sufficient movie selection."

Another stretch. Something's gotta give -- the expectation that Netflix will always have something new and interesting or its $8/month all-you-can-eat pricing scheme.

"Netflix just works, wherever you are, with an interface that does not require the ability to read, which is critical for children, increasing the Netflix's overall 'stickiness,'" Greenfield added.

I presume Wall Street firms consider literacy a prerequisite for an analyst gig.

There's this book I was excited to read -- These Guys Have All The Fun: Inside The World Of ESPN -- but it just never did much for me. However, it's convenient to pull it off the shelf, turn to page 5 and cite a few lines that outline the history of pay-TV alongside the introduction of ESPN as the world's first all-sports television network:

... in 1978, there were just over 14 million homes receiving cable -- less than 20 percent of TV households. HBO had gone on the air in 1975 but offered limited programming and signed off at midnight . . . and in 1978, despite the fact that HBO reached only 1.5 million homes, Viacom fired up its slow-blooming imitation, Showtime.

In terms of growth trajectory, we're dealing with a much different population -- in terms of size and savvy -- than we were in the late 1970s. So, of course, you can't compare HBO (or Showtime's) growth side-by-side with Netflix's.

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