hbo-netflix

So far, 2014 is Netflix’s year.

Last Friday, the company debuted the much-anticipated second season of “House of Cards” to favorable reviews (most of the detractors are people who never really liked the over-the-top but seductive political melodrama in the first place). Netflix also announced the return of the less popular but equally critically-acclaimed prison comedy-drama “Orange is the New Black.” All this happened on the heels of a strong fourth quarter where the company beat expectations on earnings, revenue, and new subscribers, adding 2.33 U.S. customers to bring its total to 33.4 million — about five million more than HBO has in the US.

Meanwhile, the cable industry is feeling the heat more than ever. Nielsen just announced it will no longer report data on “cord cutters” (or what it calls “zero-TV households”) not because they don’t exist in significant numbers, but because they’re bad for the industry’s image, some say.

The only thing that hasn’t gone Netflix’s way is a recent net neutrality ruling which could allow Internet Service Providers like Verizon to slow down Netflix’s site if it doesn’t play by the ISP’s rules. Netflix CEO Reed Hastings reportedly denies this is happening, but something’s causing Netflix to slow down on Comcast and Verizon. I collected some theories here.

Is it time for the golden boy of great television HBO to be worried?

Not based on this month’s disclosure of HBO’s revenue. For the first time ever, Time Warner revealed HBO’s earnings separately and its profits are far greater than Netflix’s, posting $1.8 billion in operating profit compared to Netflix’s $228 million. That didn’t stop the New York Times yesterday from furthering the “Netflix vs HBO” meme, something Hastings himself has promoted in the press. That said, just because Netflix is still a long way from achieving HBO level profits, that doesn’t mean it can’t catch up over time. Netflix is certainly growing faster.

The real winners here, however, are the couch potatoes of America. These companies, including Hulu and Amazon Prime, are investing in high quality original content as quickly as they’re investing in technology. In addition to creating more great television, this development is also arguably good for consumers, because it’s supported by subscriptions, not ads. You don’t have to sit through commercials on Netflix or HBO, nor do these companies have the same incentives to collect vast amounts of data on users to support advertisers like Google or Pandora do.

On the flip side, the content game is a make-or-break business. Just look at AMC. Back in 2011, observers wrote that the network had become “HBO’s nightmare.” But fast forward to 2014: Its crown jewel in terms of storytelling “Breaking Bad” ended its run. Its other critical darling “Mad Men” will end after this year. It still has the hugely popular “Walking Dead,” but other attempts at more serious HBO-style fare have floundered, like “Low Winter Sun” which was cancelled after one season, and “The Killing” which was somewhat better received, but also ultimately cancelled (The show will find new life on… where else? Netflix).

HBO, however, shows no signs of slowing down. Its most recent achievement, “True Detective,” is for this writer as masterful as anything the network’s done. Nevertheless, let’s not bury AMC quite yet: the network’s total viewership rose 16 percent last year which is significant, even if it was largely due to the “Breaking Bad” finale

For Netflix to be HBO’s new nightmare it will need to continue delivering great original content like “House of Cards” and “Orange is the New Black.” Because it lacks HBO’s longstanding reputation, it may not be able to weather a lull in quality like the one HBO went through following the end of “The Sopranos” and “The Wire.” And finally, it also may need to watch its back: If a proposed Time Warner-Comcast merger is approved, that will give Comcast even more incentive to try and burn Netflix by throttling its Internet speeds.

Again, though, this is as much art as science. The only way an Internet company (or a less illustrious cable network like AMC for that matter) can disrupt HBO is by making great content. “Content is king,” blah blah blah, but in this case, the media mantra is true.