HBO Finally Reveals Profit Numbers. Take That, Netflix

Netflix executives often benchmark their growth and aspirations against HBO, the Time Warner-owned premium-cable pioneer of “event shows” such as The Sopranos and Game of Thrones. At this point, Netflix’s unofficial motto is: We want to be HBO before they become us. Now it appears as if the cable-TV executives have heard enough about the Silicon Valley upstart’s torrid subscriber growth and want to give us something else to talk about.

For the first time, Time Warner has broken out HBO’s own, impressive growth figures in the company’s earnings report. HBO, it turns out, boasts both stronger profitability and a vast lead in international subscribers over Netflix. The nearly 2 million U.S. subscribers HBO added last year mark the highest such increase in 17 years, according to the report, with subscription revenue up 4 percent, to $4.9 billion. Operating income jumped 8 percent in the last year, to $1.68 billion.

Netflix, meanwhile, had just under $4.4 billion in revenue, with $228 million in operating income last year. Netflix added 2.3 million domestic subscribers in the fourth quarter, giving the online-streaming service 33.4 million paid U.S. members and a similar forecast for the current quarter. In other words, the upstart has a growth story that has made its stock sizzle—soaring more than 300 percent in 2013—while the veteran is comfortably profitable and still sees ample prospects outside the U.S.

HBO has about 114 million total members—the number hits 133 million if you include subscribers to its Cinemax division—compared to 44 million at Netflix. (Time Warner executives also said today that they operate HBO and Cinemax as a single unit and consider the latter channel “an undervalued asset,” given its viewership, which ranks higher than that of Starz and is comparable to that of Showtime.) HBO’s international revenues increased to almost 25 percent of its total last year, and executives said today that they expect viewers abroad will continue to increase in importance for the unit’s financial returns.

Netflix, too, plans a major expansion abroad this year; the company counts fewer than 10 million paid members from international markets. Most analysts expect the company to enter Germany and France. Back in October, Netflix Chief Executive Officer Reed Hastings declined to predict when, or even if, his company would top HBO’s overall subscriber tallies. “It’ll be a long time,” he said. “They’ve been at it since 1972—that’s 40 years—and we’ve been at it in the streaming sense only seven years.”