Discover The
Future of Work

As Seen On TV: Netflix, HBO, And The Race To The Crossroads

Code Halos
Consumer Experience

As Seen On TV: Netflix, HBO, And The Race To The Crossroads

On August 7th, 2014, Netflix CEO Reed Hastings reported on his Facebook site that Netflix now generates more revenue from subscriptions...

5 Minutes Read

On August 7th, 2014, Netflix CEO Reed Hastings reported on his Facebook site that Netflix now generates more revenue from subscriptions than its premium cable network rival HBO.

Minor milestone: last quarter we passed HBO is subscriber revenue ($1.146B vs $1.141B). They still kick our ass in profits and Emmy's, but we are making progress. HBO rocks, and we are honored to be in the same league. (yes, I loved Silicon Valley and yes it hit a little close to home.)

Let’s consider Netflix for a moment. It’s now so woven into the fabric of everyday life, it’s hard to remember a time (not that long ago!) walking into a Blockbuster, or a Hollywood Video on a Friday night. To obtain the “entertainment asset” for weekend viewing (“Dang!  I guess I got here too late … all the Jerry Maguires are checked out… guess I’ll rent Cocktail again… Cruise was pretty good in that, right? Amirite?!?”). And then the thrill of the little red and white envelopes arriving in the mail, the dustup over “Qwikster”, and now the beautiful, digital experience that prompted to state: “Netflix—beautiful, beautiful Netflix—is, experts hypothesize, the pinnacle of the human experience.”

So, hats off to Netflix, a poster-child of the Code Halos phenomenon. Surpassing HBO in terms of subscriber revenue is no small feat. And I’d definitely concur that it has a lot to do with the much-vaunted Netflix experience. Our own Paul Roehrig, Ben Pring and Malcolm Frank discussed the secret of its success at length in the Code Halos book

Big Data has enabled Netflix to continue to gain insights into its customers, highlighting new opportunities for the company…. Big bets are now being informed by Big Data, and no one knows more about audiences than Netflix*... An executive who asked not to be named in the article said this model would change the way the TV business operates. “… [I]t is clear that having a very molecular understanding of user data is going to have a big impact on how things happen in television,” he said. Consider that phrase: “a very molecular understanding” of customer desires and product development.


In his latest announcement, Hastings is right to point out the quality of HBO’s programming (which his comment about Emmys infers). But here’s my own personal story of how the war between access and content played out. And it suggests that Netflix’s real competition lies not with HBO, but (like many industries) against the juggernaut of Amazon. I recently got pulled in by HBO’s Game of Thrones, probably the last American (or indeed, the last person in the TV-watching world) to do so. I turned to HBO (and Netflix competitor) Amazon to binge-watch GoT Seasons 1-3 on just about any streaming device imaginable (on planes, in taxis, in hotel rooms, in my own living room courtesy of Roku). The multi-platform and omni-channel Amazon Instant Video experience was great – and felt really natural, seamless, and integrated. As Frank, Roehrig and Pring write in Code Halos:

A beautiful consumer experience is also central to success, and in many cases is more difficult to achieve—since it often requires us to rethink business processes and organizational models, along with the heavy lifting of change management. This can be particularly dif­ficult for an established organization, since it needs to accomplish it in parallel—and often in conflict—with existing business models and channels…The success of many Code Halo pioneers [has] much to do with compelling design—to lead customers to an irrational sense of connection and loyalty

But then I came to the present Season 4. Not available on Amazon. Darn – what’re you up to HBO? OK… over to the “HBO GO” iPhone app. But wait – I need an actual HBO TV subscription? Obtained from my local cable company back in California? I’m on a business trip in New Jersey! I can’t just buy the episodes piecemeal from the Cloud anymore? Huh? I ended up having to set up a one-month HBO subscription for $10.99, but had to wait to do it back at home (no way could I remember the years-ago password we had set up through Comcast while out of town on my trip… Where’s that handy “sign in through Facebook” feature?  Or Amazon?). In the end, though, I probably saved more money – each Amazon episode cost $2.99 a pop (in lo-def, which saved a dollar off the HD versions. Let’s face it; a White Walker on an iPhone screen is still Small Screen viewing). But I probably would have shelled out twice the unit price – at that moment – to get my GoT fix, on demand. The bright side is that now (for this month, anyway), like Reed Hastings, I also get to watch Silicon Valley – which I also love, and also like Hastings – often hits a little too close to home…

Congratulations Netflix – one “HBO” down, and one “Amazon” to go…


This content is bookmarked!...

Contact Us

Your information has been already submitted successfully!