Netflix is dominant in the market, but by no means is it a monopoly. It's bidding against Hulu and Amazon.com for content, and Hulu has 12 million paid subscribers while Amazon has tens of millions of Prime members around the world.
Importantly, Netflix has already proved capable of producing a profit. It's produced $0.23 in earnings per share over the trailing 12 months, and that comes at a time when the company is aggressively expanding abroad. One of the saving graces has been Netflix's ability to increase its pricing -- or "drive revenue," as Bewkes put it. You don't need to be a monopoly to do that.
Netflix stock may be overvalued, trading hands at at a ridiculous forward P/E ratio around 330. Last quarter's results, illustrating the effect of Netflix raising prices on a large section of users, is a good indication that Netflix's pricing power isn't unlimited, which was a bit of a wake-up call for investors. But one could just as easily make a bullish case for the stock, after investors dropped the price back into the double digits.
Can HBO reach 70 million U.S. subscribers?
HBO currently has around 32 million subscribers in the United States, trailing Netflix, which has 47 million. But Bewkes thinks there's potential for a lot more. The company's over-the-top service, HBO Now, surpassed 1 million subscribers in its first year, and Bewkes says "it's going exactly as we expected." Further, he expects to continue penetrating the 12 million broadband-only households.
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