Can HBO Go compete with Netflix?

This week, HBO announced that it had inked an exclusive deal with Universal Pictures that would prevent Netflix from streaming Universal movies for another 10 years. That means Netflix's online subscribers won't be seeing a host of popular films — including classics like American Graffiti and Jaws, or newer movies like the Bourne franchise — anytime soon.

HBO's coup is the latest sally in an increasingly competitive battle between online video-streaming sites, of which Netflix is the current leader. In addition to HBO's online service HBO Go, Netflix is facing competition from Amazon's Prime Instant Video, Hulu, Verizon, and Apple. But with the Universal deal, as well as a menu of original shows like Game of Thrones and Girls, HBO is emerging as "the closest thing Netflix has to a direct competitor," argues Paul Tassi at Forbes.

The obvious count against HBO Go is that you have to fork over a bunch of cash for the mother channel before you can subscribe to the online service. Netflix's streaming service costs about $8 a month — much cheaper than HBO. Indeed, investors brushed off the news of the HBO-Universal deal, sending Netflix shares to about $100, their highest level since early 2012. "Investors may be wising up to how Netflix is going to profitably offer streaming content that can compete with far more expensive cable and satellite subscriptions," says Antoine Gara at The Street.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

In addition, Netflix signed a deal last month with Walt Disney Studios that would give it exclusive rights to stream Disney's new releases beginning in 2016. The deal includes new releases from Pixar and Marvel Studios.

However, with online services snatching up rights from different movie and television studios at a breathtaking pace, Netflix could soon become just one video-streaming site among many. "Netflix is trading as if it's the undisputed leader in the streaming video industry — but all the recent deals by the likes of HBO and Amazon show just how fragmented the market is," warns Paul R. LaMonica at CNN.

Furthermore, HBO is launching a subscription model for HBO Go as a standalone service in Scandinavia, which could serve as a predecessor for a similar move in the U.S. With Universal's films in its pocket, as well as a much stronger slate of original shows, that version of HBO Go could prove to be a much stronger competitor against Netflix.