Netflix Flying High After Q1 Success Propels it Past HBO

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Reed Hastings has thrown down the gauntlet to the gold-standard of pay-tv and on-demand as a new model emerges, largely defined by consumers.

Netflix has officially surpassed HBO in subscribers, reporting 29.17 million domestic subscribers in the first quarter of 2013, while HBO ended 2012 with 28.7 million, according to SNL Kagan. The company’s stock passed $200 a share for the first time since 2011 after reporting its quarterly earnings.

Ted Sarandos, chief content officer for Netflix told GQ that, “The goal is to become HBO faster than HBO can become us.” It looks like they’re well on their way. 

Aside from subscribers and revenue, Netflix is now competing with HBO for talent and creative ideas. The streaming company recently launched a new original series, Hemlock Grove, while it’s slated to capitalize on the Arrested Development series in May. “This is the direction that storytelling is evolving, where you’re going to have the most interesting story lines, the most interesting characters,” Kevin Spacey, star and executive producer of the Netflix original series House of Cards. “What a company like Netflix is doing is the ultimate expression of individual control, proof of what people’s attention span really is.” 

Of Netflix’s subscriber increase in Q1, more than two million in the US are attributed to the success of its first original series. Those who checked in to Netflix for House of Cards stayed for the most part, with fewer than 8,000 who paid the $7.99 monthly fee to watch the show choosing to cancel.[more]

“The global viewing and high level of engagement with the show increased our confidence in our ability to pick shows Netflix members will embrace and to pick partners skilled at delivering a great series,” Hastings and CFO David Wells wrote in a letter to investors. “The high level of viewer satisfaction implies we are able to target the right audience without the benefit of existing broadcast or cable viewing data, and the strong viewing across all our markets gives us faith in our ability to create global content brands in a cost-effective, efficient way.”

After scoring their first hit with Cards, Netflix released Hemlock Grove, a small-town werewolf soap opera starring Famke Janssen and Bill Skarsgard. Both series leveraged the growing dual trends of binge-viewing and no waiting—two trends that are disabling other pay-TV models and cable. But according to House of Cards producer Beau Willimon, waiting is dead. “Our goal is to shut down a portion of America for a whole day,” he said. And while the company can rest comfortably on the successes of its series, it’s instead turning to other channels to further engagement. The company launched a Facebook feature that allows users to see what their friends are watching and share their thoughts, and recently signed licensing deals with Warner Bros. Televison and Fox Television Studios. And if you still can’t get enough Netflix? The company just announced a new subsciption option: four simultaneous streams for $11.99 a month. 

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