Time Warner's HBO, Online Offerings Are Compelling Reasons to Invest

For the next eight Sundays, audiences worldwide will watch each thrilling episode of HBO's blockbuster fantasy series Game of Thrones. But in a departure from television viewing of the past, they'll be streaming the program on computers, laptops, tablets and even mobile phones through the cable channel's standalone viewing service.

They will be part of a battle for supremacy in the hot tech sector with twists and turns and machinations to rival the hullabaloo going on in Westeros. 

Time Warner (TWX) , the parent of HBO, is at the forefront of this fierce competition, and that is part of the reason why it makes it a good addition to an investment portfolio. Over the past year, the company has increased its subscribers to HBO Now programming, which is available on computers and mobile devices. The company offers a massive audience of subscribers to its various HBO platforms and is investing significant resources in new programming. On Wednesday morning, partly due to its HBO platforms' success, Time Warner reported solid growth in revenue and profits for its second quarter.

Not long ago, the only way to (legally) access exclusive content from cable channels was through a cable channel subscription. That all changed with the advent of video streaming services such as Internet dynamosNetflix and Amazon. 

Pacific Crest analysts have estimated that the top U.S. cable companies lost nearly 500,000 subscribers in the second quarter of 2015 alone. And that number is growing.

To compete with the Internet-only services, the major cable and broadcast networks have ramped up their own online presences, offering online subscriptions for exclusive content.

Some entertainment companies have even forged alliances in the war against the Internet invaders. Walt Disney and 21st Century Fox each own large shares in Hulu, which streams both original content as well as programs and films released by these companies' studios.

HBO, which is owned by Time Warner, launched HBO Now a year ago to address the growing ranks of viewers who are abandoning their televisions. This is what is known as over-the-top or OTT service. That is, subscribers can access content without subscribing to traditional cable service.

HBO Now has been a modest success, growing from 800,000 members at the end of 2015 to more than 1 million members today. The number of HBO Now subscribers still falls short of Netflix, which boasts more than 30 million customers.

When examining HBO across all platforms, however, the service has more than 80 million subscribers.

Time Warner hopes to continue growing this number, recently promising to add around 600 hours of original content programming to its HBO platforms to lure new subscribers. Rumors have been swirling that Time Warner is considering a $2 billion purchase for a 25% stake in Hulu itself.

When Time Warner released its earnings, the company specifically credited HBO and HBO Now as drivers behind its positive growth. Revenue from HBO platforms grew 7.7% year over year, to $1.51 billion. The company reported profits of $1.21 billion, a sizable increase from the $970 million it clocked in the same quarter last year.

Although its streaming service isn't as popular as Netflix, Time Warner is a clear winner in the battle for overall subscribers. Time Warner stock gained on Wednesday and closed the session at $74.80. The stock still has a way to go before hitting its 52-week high of $91.34, however. Investors who get in while shares are so discounted could stand to rake in some dragon-sized profits.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.