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Netflix on HBO's Web-only service: It's inevitable, sensible

Netflix, which views HBO as its primary long-term competitor, believes consumers will subscribe to both online services.

Roger Cheng Former Executive Editor / Head of News
Roger Cheng (he/him/his) was the executive editor in charge of CNET News, managing everything from daily breaking news to in-depth investigative packages. Prior to this, he was on the telecommunications beat and wrote for Dow Jones Newswires and The Wall Street Journal for nearly a decade and got his start writing and laying out pages at a local paper in Southern California. He's a devoted Trojan alum and thinks sleep is the perfect -- if unattainable -- hobby for a parent.
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Roger Cheng

The "Crouching Tiger, Hidden Dragon" sequel is one of the exclusive bits of content for Netflix. Netflix

Netflix is cool with HBO as an online competitor.

HBO shook up the cable world and delighted cord cutters when its chairman and CEO, Richard Plepler, said it would launch an online-only service next year, finally breaking free from the traditional model that requires consumers to have a cable-TV subscription.

A standalone service would put HBO directly into competition with Netflix, which boasts a wide library of television shows and movies available to stream online, but has been driving loyalty through original programming and exclusive content. Netflix has 37.2 million streaming customers in the US and an international subscriber base of 15.8 million.

Netflix, which has considered HBO its primary long-term competitor over the past three years, doesn't appear to feel the heat. "The competition will drive us both to be better," the company said in its earnings statement on Wednesday. "It was inevitable and sensible that they would eventually offer their service as a standalone application."

The company posted another rise in profit in the third quarter, but warned that its fourth-quarter results would fall well short of Wall Street expectations. Netflix's stock fell more than 25 percent to $334 in after-hours trading on Wednesday.

Given the different range of exclusive content -- for example, "House of Cards" for Netflix and "Game of Thrones" for HBO -- Netflix believes consumers will subscribe to both services. "We think it is likely we both prosper as consumers move to Internet TV," the company said.