When will Netflix Be Bigger than HBO?

Some of us would liken Netflix to HBO, namely, that Netflix is a programming network, not a delivery mechanism. So a logical question might be “when will Netflix be bigger than HBO?”

The question is important to the extent that it sheds light on the potential value of a video streaming business, where content aggregation really is the business, not "delivery."

The answer is “it depends.” If you look only at gross revenue, Netflix already probably is bigger than HBO. If you look at net profits, or profit margin, Netflix is six to seven times smaller than HBO.

Netflix annual revenue now is on par with that of HBO, though it is likely Netflix profit margins are a fraction of HBO’s profit margins. To wit, Netflix books more than $4 billion annually, while HBO probably books about the same amount of revenue.

Netflix also is closing on HBO global subscriber figures, as well. Netflix has about 30 million paid U.S. subscribers, while HBO has about 29 million U.S. subscribers.

HBO profit margin is probably in the 33 percent range, while Netflix profit margin is in the five percent range.

So the real question is not so much “when will Netflix be bigger than HBO?” but “when will Netflix be as profitable as HBO?”