Netflix ready for battle with HBO

Netflix chief executive Reed Hastings expects an "arms race" to dominate web-based TV viewing, with Time Warner's HBO Go service his top competitor.

"The competitor we fear most is HBO Go," Hastings said at a UBS media conference in New York. "HBO is becoming more Netflix-like and we're becoming more HBO-like. The two of us will compete for a very long time."

Hastings downplayed the emergence of other competitors, such as Verizon Communications and Amazon.com, saying rivals will have to spend US$1 billion ($1.28 billion) to US$2 billion a year on content. New competitors also will have to get their offerings on more devices in the home, particularly so-called smart TVs with built-in web connections, he said.

Half of American home video viewing will come through the internet as soon as 2016, aided by expanding fibre-optic networks that can carry the data and more web-enabled TVs, Hastings said.

"The industry is very motivated around this concept of smart TVs," Hastings said.

Hastings forecasts losses for 2012 because of costs to start service in Britain and Ireland. The company in October said free cash flow would lag behind net income for several quarters as it increased spending on content.

Hastings said Netflix saw no quick return to profitability after alienating customers with changes in pricing and subscription terms earlier this year.

Netflix lost 800,000 US subscribers in the third quarter, the company reported on October 24. Hastings declined to comment on fourth-quarter subscriber trends.

- Bloomberg

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