Is HBO's investment in Netflix-like firm a strategy shift?

HBO has invested $10 million into an Australian video rental service that operates much like Netflix, and right away, pundits say Time Warner is bowing to Netflix's business model. It's not that simple.

At a time when HBO tries to downplay the suggestion that any significant rivalry exists between it and Netflix, managers there have worked to acquire a Netflix lookalike in Australia.

Netflix CEO Reed Hastings predicted in December that HBO and Netflix would start to resemble each other more and more. CBS '60 Minutes'

And get this: the name of this video rental service HBO bought is Quickflix.

Seem familiar? The name sounds like a blend of Netflix and the company's ill-fated spinoff, known as Qwikster . HBO's managers had to know how it would look for the premium cable channel to invest $10 million in a company with a name like that.

Not surprisingly, some media outlets are writing that HBO's 15 percent stake in Quickflix, which offers Internet streaming and DVD rentals, is an attempt to get a Down Under jump on Netflix. Some are speculating that Time Warner, which owns HBO, is supposedly preparing to compete with Netflix by becoming more like it. In December, Netflix CEO Reed Hastings predicted that Netflix and HBO will come to resemble each other more and more.

But hold on a sec. Netflix isn't in Australia and hasn't indicated that it plans to open up there. The company's international expansion is on hold while the company tries to bolster its existing overseas businesses , such as in Latin America and Canada. Just last month, Netflix launched in the United Kingdom and that's supposed to be the last new market for a while.

In addition, HBO's investment in Quickflix is modest, at best. To say that a 15 percent stake of an Australian Netflix-esque service signals a new worldwide strategy for HBO may be jumping the gun a tad.

The company's Internet strategy is anchored to HBO Go, which provides online access to the company's entire video archive, provided that a user subscribes to one of HBO's cable partners. The company has already begun rolling out HBO Go in some overseas markets, so managers don't appear to have lost confidence in their own Web service.

But the fact that HBO has grabbed even a small piece of an Internet movie distributor is too conspicuous not to at least speculate about.

Time Warner's history shows that the company likes control of video distribution, as well as production. It owns cable TV stations such as Turner Broadcasting and the major film studio Warner Bros. The company owned Time Warner Cable before spinning it off. Why wouldn't it also want a piece of a Web-based distributor, if a good deal presented itself?

My take is, let's wait and see if HBO or Time Warner do any more of these deals, and then we can ask whether they have begun to wave white flags at Netflix.

 

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