Reed Hastings has added another talent to his lengthy résumé: the humblebrag.
Yesterday, the Netflix CEO used Facebook to point out that the video streaming service is now pulling in more subscriber revenue than HBO. "Minor milestone: last quarter we passed HBO is subscriber revenue ($1.146B vs $1.141B)," Hastings boasted. But then came the modesty. "They still kick our ass in profits and Emmy's, but we are making progress. HBO rocks, and we are honored to be in the same league," he wrote, adding he was a fan of the HBO sitcom Silicon Valley. ("It hit a little close to home.")
Hastings' conciliatory tone is a far cry from his more typical taunting of the premium cable network he sees as Netflix's primary competitor. But maybe he's being nice because his company, by one crucial measure, still has a long way to go.
Not so long ago, parent company Time Warner didn't break out HBO's profits separately. Once it started to do so earlier this year, however, the contrast was stark. In quarterly numbers released this week, HBO's profits surged compared to last year to hit $548 million. Netflix, by comparison, reported second-quarter profits of $71 million.
Nevertheless, Wall Street still likes what it sees in Netflix. Netflix shares, though they tend to be volatile, are flirting with their all-time high on an increase of more than 4 percent following Hastings' post. Unlike Time Warner, Netflix still enjoys huge cachet as a tech company, not just an entertainment company. And in tech, especially for relatively young companies like Netflix, growth is seen as a much more valuable metric of future prospects than profit. Netflix's massive turnaround---following an initially disastrous attempt to rebrand itself as its DVD delivery business faded---shows that Hastings has the acumen to hang in there.
Whether Netflix can ever really gain enough leverage to exact better licensing deals from Hollywood---and hence better margins for itself---is an open question. But maybe those deals will start to matter less and less anyway. HBO's success in the 21st century is all about its own shows, not the movies that come on in between. Similarly, Netflix subscriptions have surged as the company gains a name for itself as a producer of its own great shows, and it plans to start making even more. To make HBO money, it seems, Netflix will keep trying to become more like HBO.
