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HBO forces Netflix to go elsewhere for its DVDs

Netflix CEO Reed Hastings apparently touched a nerve over at Time Warner, parent company of HBO, as the premium cable service has stopped providing its shows on DVD to Netflix.

Netflix will still be able to rent 'True Blood' and other HBO shows, but it won't get them directly from HBO.
John P. Johnson for HBO

HBO has stopped providing DVDs of its shows to Netflix as competition between the two companies heats up. The move, however is unlikely to disrupt rentals of HBO discs because Netflix can still acquire the DVDs from other sources.

HBO, the powerhouse entertainment channel known for such shows as "The Sopranos," "Six Feet Under," and "True Blood" stopped providing the discs, which it made available at a discount, as of January 1, according to sources who spoke to CNET.

Spokesmen for both companies confirmed the move.

HBO's decision is unlikely to affect Netflix's business. One source told CNET that while Netflix won't be able to acquire the discs at a discount, Netflix has a score of different venues where it can acquire HBO's DVDs.

In an e-mail, Netflix spokesman Steve Swasey said "Netflix will continue to provide HBO titles on DVD and Blu-ray."

If this kind of broadside is unlikely to make much of an impact, then why would HBO bother? Simple. This is a brush-back pitch. This is HBO signalling that it heard what Netflix CEO Reed Hastings had to say during an appearance at a conference in New York last month about how the rivalry between the two is just getting started. Jeff Bewkes, CEO of HBO parent Time Warner, is responding with a gesture. He's saying: That's fine, Reed, let's compete.

HBO doesn't offer shows to Netflix for online streaming and now it won't offer them on DVD either. Sure, Netflix execs can acquire HBO's discs elsewhere, but they won't get them from HBO.

Execs from the two companies have been circling each other for over a year, as Netflix's prominence as a Web distributor of TV shows and films mushroomed. Bewkes chided the press for making too much of Netflix's emergence. He said that by implying that such a small company could seize control of video distribution was a little like saying the Albanian army could conquer the world.

Hastings on the other hand was more demure and downplayed talk about Netflix and HBO being rivals--for a while. Then, last month, the Netflix founder must have known he would anger some in TV by telling an audience at the UBS Media conference that in 10 years, half of all TV viewing in the U.S. would come via Internet streaming.

He also said the "competitor we fear the most" is HBO. "They aren't competing directly with us now," Hastings said, "but they can. HBO is becoming much more Netflix-like, and we're becoming much more HBO-like...We'll push each other like two runners."

It's probably not lost on anyone in TV that Netflix has begun to encroach deeper into their turf by acquiring original programming. The company announced this week that "Lilyhammer"--a show starring Steven Van Zandt, the rocker and a former actor on the "The Sopranos"--will debut on February 6. Later in the year, the company is expected to release another Netflix original series with "House of Cards," starring Kevin Spacey.

Update 11:30 a.m. PT: To make clear that Netflix has other sources from which to acquire HBO's DVDs.