Does HBO Now Need To Lower Its Price To Compete With Netflix?

HBO lowering the price of its HBO-Now subscription would likely have a positive impact on Time Warner Inc’s TWX stock in the near term, Loop Capital Markets’ David W. Miller said in a report. He maintained a Buy rating on the company, with a price target of $96.

HBO May Reduce Price

HBO contributes 20.7 percent of Time Warner’s revenues and 25.1 percent of company-wide EBIT. The HBO-Now subscription is currently priced at $15 per month, which looks high compared to Netflix, Inc. NFLX at $7.99 per month, Hulu Plus at $8.00 per month, Amazon.com, Inc.AMZN Prime at $8.25 per month, and Showtime OTT at $11.00.

A marginal decrease in price, maybe to $12.00 per month, would be positive for Time Warner’s stock in the near term, Miller stated. He added, however, that investors should recognize the fact that HBO-Now is “less of a syndication service and more of a real, virtual network branded by original programming.”

Comparing Services

“Stated a little more bluntly, the material on HBO-Now is all A-list material, including roughly 40% of the content mix being movies, which are either all box office winners, or awards-winners,” Miller wrote. On the other hand, the movie selection at Netflix is declining, not merely in volume, but also in terms of quality, since the company has chosen to lean more towards episodic television.

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